[Federal Register Volume 80, Number 83 (Thursday, April 30, 2015)]
[Proposed Rules]
[Pages 24324-24689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09245]



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Vol. 80

Thursday,

No. 83

April 30, 2015

Part II





 Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Part 412





Office of the Secretary





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45 CFR Part 170





Medicare Program; Hospital Inpatient Prospective Payment Systems for 
Acute Care Hospitals and the Long-Term Care Hospital Prospective 
Payment System Policy Changes and Fiscal Year 2016 Rates; Revisions of 
Quality Reporting Requirements for Specific Providers, Including 
Changes Related to the Electronic Health Record Incentive Program; 
Proposed Rule

  Federal Register / Vol. 80 , No. 83 / Thursday, April 30, 2015 / 
Proposed Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 412

Office of the Secretary

45 CFR Part 170

[CMS-1632-P]
RIN-0938-AS41


Medicare Program; Hospital Inpatient Prospective Payment Systems 
for Acute Care Hospitals and the Long-Term Care Hospital Prospective 
Payment System Policy Changes and Fiscal Year 2016 Rates; Revisions of 
Quality Reporting Requirements for Specific Providers, Including 
Changes Related to the Electronic Health Record Incentive Program

AGENCY: Centers for Medicare and Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: We are proposing to revise the Medicare hospital inpatient 
prospective payment systems (IPPS) for operating and capital-related 
costs of acute care hospitals to implement changes arising from our 
continuing experience with these systems for FY 2016. Some of these 
changes implement certain statutory provisions contained in the Patient 
Protection and Affordable Care Act and the Health Care and Education 
Reconciliation Act of 2010 (collectively known as the Affordable Care 
Act), the Pathway for Sustainable Growth Reform (SGR) Act of 2013, the 
Protecting Access to Medicare Act of 2014, and other legislation. We 
also are addressing the update of the rate-of-increase limits for 
certain hospitals excluded from the IPPS that are paid on a reasonable 
cost basis subject to these limits for FY 2016.
    We also are proposing to update the payment policies and the annual 
payment rates for the Medicare prospective payment system (PPS) for 
inpatient hospital services provided by long-term care hospitals 
(LTCHs) for FY 2016 and implement certain statutory changes to the LTCH 
PPS under the Affordable Care Act and the Pathway for Sustainable 
Growth Rate (SGR) Reform Act of 2013 and the Protecting Access to 
Medicare Act of 2014.
    In addition, we are proposing to establish new requirements or to 
revise existing requirements for quality reporting by specific 
providers (acute care hospitals, PPS-exempt cancer hospitals, and 
LTCHs) that are participating in Medicare, including related proposals 
for eligible hospitals and critical access hospitals participating in 
the Medicare Electronic Health Record (EHR) Incentive Program. We also 
are proposing to update policies relating to the Hospital Value-Based 
Purchasing (VBP) Program, the Hospital Readmissions Reduction Program, 
and the Hospital-Acquired Condition (HAC) Reduction Program.

DATES: Comment Period: To be assured consideration, comments on all 
sections of this proposed rule must be received at one of the addresses 
provided in the ADDRESSES section no later than 5 p.m. EST on June 29, 
2015.

ADDRESSES: In commenting, please refer to file code CMS-1632-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (no duplicates, 
please):
    1. Electronically. You may (and we encourage you to) submit 
electronic comments on this regulation to http://www.regulations.gov. 
Follow the instructions under the ``submit a comment'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1632-P, P.O. Box 8013, 
Baltimore, MD 21244-1850.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments via 
express or overnight mail to the following address ONLY: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-1632-P, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal Government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call the telephone number (410) 786-7195 in advance to schedule 
your arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, we refer readers to the 
beginning of the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:
    Ing-Jye Cheng, (410) 786-4548 and Donald Thompson, (410) 786-4487, 
Operating Prospective Payment, MS-DRGs, Deficit Reduction Act Hospital-
Acquired Acquired Conditions--Present on Admission (DRA HAC-POA) 
Program, Hospital-Acquired Conditions Reduction Program, Hospital 
Readmission Reductions Program, Wage Index, New Medical Service and 
Technology Add-On Payments, Hospital Geographic Reclassifications, 
Graduate Medical Education, Capital Prospective Payment, Excluded 
Hospitals, and Medicare Disproportionate Share Hospital (DSH) Issues.
    Michele Hudson, (410) 786-4487, Long-Term Care Hospital Prospective 
Payment System and MS-LTC-DRG Relative Weights Issues.
    Siddhartha Mazumdar, (410) 786-6673, Rural Community Hospital 
Demonstration Program Issues.
    Cindy Tourison, (410) 786-1093, Hospital Inpatient Quality 
Reporting and Hospital Value-Based Purchasing--Program Administration, 
Validation, and Reconsideration Issues.
    Pierre Yong, (410) 786-8896, Hospital Inpatient Quality Reporting--
Measures Issues Except Hospital Consumer Assessment of Healthcare 
Providers and Systems Issues.
    Elizabeth Goldstein, (410) 786-6665, Hospital Inpatient Quality 
Reporting--Hospital Consumer Assessment of Healthcare Providers and 
Systems Measures Issues.
    Mary Pratt, (410) 786-6867, LTCH Quality Data Reporting Issues.
    Kim Spalding Bush, (410) 786-3232, Hospital Value-Based Purchasing 
Efficiency Measures Issues.
    James Poyer, (410) 786-2261, PPS-Exempt Cancer Hospital Quality 
Reporting Issues.

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    Deborah Krauss, (410) 786-5264, and Alexandra Mugge, (410-786-
4457), EHR Incentive Program Clinical Quality Measure Related Issues.
    Elizabeth Myers, (410) 786-4751, EHR Incentive Program Nonclinical 
Quality Measure Related Issues.
    Lauren Wu, (202) 690-7151, Certified EHR Technology Related Issues.
    Kellie Shannon, (410) 786-0416, Simplified Cost Allocation 
Methodology Issues.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All public 
comments received before the close of the comment period are available 
for viewing by the public, including any personally identifiable or 
confidential business information that is included in a comment. We 
post all public comments received before the close of the comment 
period on the following Web site as soon as possible after they have 
been received: http://www.regulations.gov. Follow the search 
instructions on that Web site to view public comments.

Electronic Access

    This Federal Register document is also available from the Federal 
Register online database through Federal Digital System (FDsys), a 
service of the U.S. Government Publishing Office. This database can be 
accessed via the Internet at: http://www.gpo.gov/fdsys.

Tables Available Only Through the Internet on the CMS Web site

    In the past, a majority of the tables referred to throughout this 
preamble and in the Addendum to the proposed rule and the final rule 
were published in the Federal Register as part of the annual proposed 
and final rules. However, beginning in FY 2012, some of the IPPS tables 
and LTCH PPS tables are no longer published in the Federal Register. 
Instead, these tables are generally only available through the 
Internet. The IPPS tables for this proposed rule are available through 
the Internet on the CMS Web site at: http://www.cms.hhs.gov/Medicare/medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on 
the link on the left side of the screen titled, ``FY 2016 IPPS Proposed 
Rule Home Page'' or ``Acute Inpatient--Files for Download''. The LTCH 
PPS tables for this FY 2016 proposed rule are available through the 
Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the 
list item for Regulation Number CMS-1632-P. For further details on the 
contents of the tables referenced in this proposed rule, we refer 
readers to section VI. of the Addendum to this proposed rule.
    Readers who experience any problems accessing any of the tables 
that are posted on the CMS Web sites identified above should contact 
Michael Treitel at (410) 786-4552.

Acronyms

3M 3M Health Information System
AAMC Association of American Medical Colleges
ACGME Accreditation Council for Graduate Medical Education
ACoS American College of Surgeons
AHA American Hospital Association
AHIC American Health Information Community
AHIMA American Health Information Management Association
AHRQ Agency for Healthcare Research and Quality
AJCC American Joint Committee on Cancer
ALOS Average length of stay
ALTHA Acute Long Term Hospital Association
AMA American Medical Association
AMGA American Medical Group Association
AMI Acute myocardial infarction
AOA American Osteopathic Association
APR DRG All Patient Refined Diagnosis Related Group System
APRN Advanced practice registered nurse
ARRA American Recovery and Reinvestment Act of 2009, Public Law 111-
5
ASCA Administrative Simplification Compliance Act of 2002, Public 
Law 107-105
ASITN American Society of Interventional and Therapeutic 
Neuroradiology
ASPE Assistant Secretary for Planning and Evaluation [DHHS]
ATRA American Taxpayer Relief Act of 2012, Public Law 112-240
BBA Balanced Budget Act of 1997, Public Law 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999, Public 
Law 106-113
BIPA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Benefits Improvement and Protection Act of 2000, 
Public Law 106-554
BLS Bureau of Labor Statistics
CABG Coronary artery bypass graft [surgery]
CAH Critical access hospital
CARE [Medicare] Continuity Assessment Record & Evaluation 
[Instrument]
CART CMS Abstraction & Reporting Tool
CAUTI Catheter-associated urinary tract infection
CBSAs Core-based statistical areas
CC Complication or comorbidity
CCN CMS Certification Number
CCR Cost-to-charge ratio
CDAC [Medicare] Clinical Data Abstraction Center
CDAD Clostridium difficile-associated disease
CDC Center for Disease Control and Prevention
CERT Comprehensive error rate testing
CDI Clostridium difficile (C. difficile)
CFR Code of Federal Regulations
CLABSI Central line-associated bloodstream infection
CIPI Capital input price index
CMI Case-mix index
CMS Centers for Medicare & Medicaid Services
CMSA Consolidated Metropolitan Statistical Area
COBRA Consolidated Omnibus Reconciliation Act of 1985, Public Law 
99-272
COLA Cost-of-living adjustment
COPD Chronis obstructive pulmonary disease
CPI Consumer price index
CQM Clinical quality measure
CY Calendar year
DACA Data Accuracy and Completeness Acknowledgement
DPP Disproportionate patient percentage
DRA Deficit Reduction Act of 2005, Public Law 109-171
DRG Diagnosis-related group
DSH Disproportionate share hospital
EBRT External Bean Radiotherapy
ECI Employment cost index
eCQM Electronic clinical quality measure
EDB [Medicare] Enrollment Database
EHR Electronic health record
EMR Electronic medical record
EMTALA Emergency Medical Treatment and Labor Act of 1986, Public Law 
99-272
EP Eligible professional
FAH Federation of American Hospitals
FDA Food and Drug Administration
FFY Federal fiscal year
FPL Federal poverty line
FQHC Federally qualified health center
FR Federal Register
FTE Full-time equivalent
FY Fiscal year
GAF Geographic Adjustment Factor
GME Graduate medical education
HAC Hospital-acquired condition
HAI Healthcare-associated infection
HCAHPS Hospital Consumer Assessment of Healthcare Providers and 
Systems
HCFA Health Care Financing Administration
HCO High-cost outlier
HCP Healthcare personnel
HCRIS Hospital Cost Report Information System
HHA Home health agency
HHS Department of Health and Human Services
HICAN Health Insurance Claims Account Number
HIPAA Health Insurance Portability and Accountability Act of 1996, 
Public Law 104-191
HIPC Health Information Policy Council
HIS Health information system
HIT Health information technology
HMO Health maintenance organization
HPMP Hospital Payment Monitoring Program
HSA Health savings account
HSCRC [Maryland] Health Services Cost Review Commission
HSRV Hospital-specific relative value
HSRVcc Hospital-specific relative value cost center

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HQA Hospital Quality Alliance
HQI Hospital Quality Initiative
HwH Hospital-within-hospital
IBR Intern- and Resident-to-Bed Ratio
ICD-9-CM International Classification of Diseases, Ninth Revision, 
Clinical Modification
ICD-10-CM International Classification of Diseases, Tenth Revision, 
Clinical Modification
ICD-10-PCS International Classification of Diseases, Tenth Revision, 
Procedure Coding System
ICR Information collection requirement
ICU Intensive care unit
IGI IHS Global Insight, Inc.
IHS Indian Health Service
IME Indirect medical education
I-O Input-Output
IOM Institute of Medicine
IPF Inpatient psychiatric facility
IPFQR Inpatient Psychiatric Facility Quality Reporting [Program]
IPPS [Acute care hospital] inpatient prospective payment system
IRF Inpatient rehabilitation facility
IQR Inpatient Quality Reporting
LAMCs Large area metropolitan counties
LOS Length of stay
LTC-DRG Long-term care diagnosis-related group
LTCH Long-term care hospital
LTCH QRP Long-Term Care Hospital Quality Reporting Program
MAC Medicare Administrative Contractor
MAP Measure Application Partnership
MCC Major complication or comorbidity
MCE Medicare Code Editor
MCO Managed care organization
MDC Major diagnostic category
MDH Medicare-dependent, small rural hospital
MedPAC Medicare Payment Advisory Commission
MedPAR Medicare Provider Analysis and Review File
MEI Medicare Economic Index
MGCRB Medicare Geographic Classification Review Board
MIEA-TRHCA Medicare Improvements and Extension Act, Division B of 
the Tax Relief and Health Care Act of 2006, Public Law 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008, 
Public Law 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Public Law 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Public Law 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Public 
Law 110-173
MRHFP Medicare Rural Hospital Flexibility Program
MRSA Methicillin-resistant Staphylococcus aureus
MSA Metropolitan Statistical Area
MS-DRG Medicare severity diagnosis-related group
MS-LTC-DRG Medicare severity long-term care diagnosis-related group
MU Meaningful Use [EHR Incentive Program]
NAICS North American Industrial Classification System
NALTH National Association of Long Term Hospitals
NCD National coverage determination
NCHS National Center for Health Statistics
NCQA National Committee for Quality Assurance
NCVHS National Committee on Vital and Health Statistics
NECMA New England County Metropolitan Areas
NHSN National Healthcare Safety Network
NQF National Quality Forum
NQS National Quality Strategy
NTIS National Technical Information Service
NTTAA National Technology Transfer and Advancement Act of 1991, 
Public Law 104-113
NUBC National Uniform Billing Code
NVHRI National Voluntary Hospital Reporting Initiative
OACT [CMS] Office of the Actuary
OBRA 86 Omnibus Budget Reconciliation Act of 1986, Public Law 99-509
OES Occupational employment statistics
OIG Office of the Inspector General
OMB [Executive] Office of Management and Budget
ONC Office of the National Coordinator for Health Information 
Technology
OPM [U.S.] Office of Personnel Management
OQR [Hospital] Outpatient Quality Reporting
O.R. Operating room
OSCAR Online Survey Certification and Reporting [System]
PAC Postacute care
PAMA Protecting Access to Medicare Act of 2014, Public Law 113-93
PCH PPS-exempt cancer hospital
PCHQR PPS-exempt cancer hospital quality reporting
PMSAs Primary metropolitan statistical areas
POA Present on admission
PPI Producer price index
PPS Prospective payment system
PRM Provider Reimbursement Manual
ProPAC Prospective Payment Assessment Commission
PRRB Provider Reimbursement Review Board
PRTFs Psychiatric residential treatment facilities
PSF Provider-Specific File
PSI Patient safety indicator
PS&R Provider Statistical and Reimbursement [System]
PQRS Physician Quality Reporting System
QIG Quality Improvement Group [CMS]
QRDA Quality Reporting Data Architecture
RFA Regulatory Flexibility Act, Public Law 96-354
RHC Rural health clinic
RHQDAPU Reporting hospital quality data for annual payment update
RNHCI Religious nonmedical health care institution
RPL Rehabilitation psychiatric long-term care (hospital)
RRC Rural referral center
RSMR Risk-standardized mortality rate
RSRR Risk-standard readmission rate
RTI Research Triangle Institute, International
RUCAs Rural-urban commuting area codes
RY Rate year
SAF Standard Analytic File
SCH Sole community hospital
SCHIP State Child Health Insurance Program
SCIP Surgical Care Improvement Project
SFY State fiscal year
SGR Sustainable Growth Rate
SIC Standard Industrial Classification
SNF Skilled nursing facility
SOCs Standard occupational classifications
SOM State Operations Manual
SSI Surgical site infection
SSI Supplemental Security Income
SSO Short-stay outlier
SUD Substance use disorder
TEFRA Tax Equity and Fiscal Responsibility Act of 1982, Public Law 
97-248
TEP Technical expert panel
THA/TKA Total hip arthroplasty/Total knee arthroplasty
TMA TMA [Transitional Medical Assistance], Abstinence Education, and 
QI [Qualifying Individuals] Programs Extension Act of 2007, Public 
Law 110-90
TPS Total Performance Score
UHDDS Uniform hospital discharge data set
UMRA Unfunded Mandate Reform Act, Public Law 104-4
VBP [Hospital] Value Based Purchasing [Program]
VTE Venous thromboembolism

Table of Contents

I. Executive Summary and Background
    A. Executive Summary
    1. Purpose and Legal Authority
    2. Summary of the Major Provisions
    3. Summary of Costs and Benefits
    B. Summary
    1. Acute Care Hospital Inpatient Prospective Payment System 
(IPPS)
    2. Hospitals and Hospital Units Excluded From the IPPS
    3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
    4. Critical Access Hospitals (CAHs)
    5. Payments for Graduate Medical Education (GME)
    C. Summary of Provisions of Recent Legislation Discussed in This 
Proposed Rule
    1. Patient Protection and Affordable Care Act (Pub. L. 111-148) 
and the Health Care and Education Reconciliation Act of 2010 (Pub. 
L. 111-152)
    2. American Taxpayer Relief Act of 2012 (Pub. L. 112-240)
    3. Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 
(Pub. L. 113-67)
    4. Protecting Access to Medicare Act of 2014 (Pub. L. 113-93)
    D. Summary of the Major Provisions of this Proposed Rule
II. Proposed Changes to Medicare Severity Diagnosis-Related Group 
(MS-DRG) Classifications and Relative Weights
    A. Background
    B. MS-DRG Reclassifications
    C. Adoption of the MS-DRGs in FY 2008
    D. Proposed FY 2016 MS-DRG Documentation and Coding Adjustment
    1. Background on the Prospective MS-DRG Documentation and Coding 
Adjustments

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for FY 2008 and FY 2009 Authorized by Public Law 110-90
    2. Adjustment to the Average Standardized Amounts Required by 
Public Law 110-90
    a. Prospective Adjustment Required by Section 7(b)(1)(A) of 
Public Law 110-90
    b. Recoupment or Repayment Adjustments in FYs 2010 Through 2012 
Required by Section 7(b)(1)(B) Public Law 110-90
    3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data
    4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by 
Section 7(b)(1)(A) of Public Law 110-90
    5. Recoupment or Repayment Adjustment Authorized by Section 
7(b)(1)(B) of Public Law 110-90
    6. Proposed Recoupment or Repayment Adjustment Authorized by 
Section 631 of the American Taxpayer Relief Act of 2012 (ATRA)
    E. Refinement of the MS-DRG Relative Weight Calculation
    1. Background
    2. Discussion for FY 2016 and Request for Comments on 
Nonstandard Cost Center Codes
    F. Proposed Adjustment to MS-DRGs for Preventable Hospital-
Acquired Conditions (HACs), Including Infections, for FY 2016
    1. Background
    2. HAC Selection
    3. Present on Admission (POA) Indicator Reporting
    4. HACs and POA Reporting in Preparation for Transition to ICD-
10-CM and ICD-10-PCS
    5. Proposed Changes to the HAC Program for FY 2016
    6. RTI Program Evaluation
    7. RTI Report on Evidence-Based Guidelines
    G. Proposed Changes to Specific MS-DRG Classifications
    1. Discussion of Changes to Coding System and Basis for MS-DRG 
Updates
    a. Conversion of MS-DRGs to the International Classification of 
Diseases, 10th Edition (ICD-10)
    b. Basis for Proposed FY 2016 MS-DRG Updates
    2. MDC 1 (Diseases and Disorders of the Nervous System): 
Endovascular Embolization (Coiling) Procedures
    3. MDC 5 (Diseases and Disorders of the Circulatory System)
    a. Adding Severity Levels to MS-DRGs 245 Through 251
    b. Percutaneous Intracardiac Procedures
    c. Zilver[supreg] PTX Drug-Eluting Peripheral Stent 
(ZPTX[supreg])
    d. Percutaneous Mitral Valve Repair System--Proposed Revision of 
ICD-10-PCS Version 32 Logic
    e. Major Cardiovascular Procedures: Zenith[supreg] Fenestrated 
Abdominal Aortic Aneurysm (AAA) Endovascular Graft
    4. MDC 8 (Diseases and Disorders of the Musculoskeletal System 
and Connective Tissue)
    a. Revision of Hip or Knee Replacement: Proposed Revision of 
ICD-10 Version 32 Logic
    b. Spinal Fusion
    5. MDC 14 (Pregnancy, Childbirth and the Puerperium): MS-DRG 775 
(Vaginal Delivery With Complicating Diagnosis)
    6. MDC 21 (Injuries, Poisoning and Toxic Effects of Drugs): 
CroFab Antivenin Drug
    7. MDC 22 (Burns): Additional Severity of Illness Level for MS-
DRG 927 (Extensive Burns or Full Thickness Burns With Mechanical 
Ventilation 96 + Hours With Skin Graft)
    8. Proposed Medicare Code Editor (MCE) Changes
    9. Proposed Changes to Surgical Hierarchies
    10. Proposed Changes to the MS-DRG Diagnosis Codes for FY 2016
    a. Major Complications or Comorbidities (MCCs) and Complications 
or Comorbidities (CCs) Severity Levels for FY 2016
    b. Coronary Atherosclerosis Due to Calcified Coronary Lesion
    c. Hydronephrosis
    11. Proposed Complications or Comorbidity (CC) Exclusions List 
for FY 2016
    a. Background
    b. Proposed CC Exclusions List for FY 2016
    12. Review of Procedure Codes in MS-DRGs 981 Through 983, 984 
Through 986, and 987 Through 989
    a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-
DRGs 987 Through 989 Into MDCs
    b. Reassignment of Procedures Among MS-DRGs 981 Through 983, 984 
through 986, and 987 Through 989
    c. Adding Diagnosis or Procedure Codes to MDCs
    13. Proposed Changes to the ICD-9-CM Coding System in FY 2016
    a. ICD-10 Coordination and Maintenance Committee
    b. Code Freeze
    14. Other Proposed Policy Change: Recalled/Replaced Devices
    H. Recalibration of the Proposed FY 2016 MS-DRG Relative Weights
    1. Data Sources for Developing the Proposed Relative Weights
    2. Methodology for Calculation of the Proposed Relative Weights
    3. Development of Proposed National Average CCRs
    4. Solicitation of Public Comments on Expanding the Bundled 
Payments for Care Improvement (BPCI) Initiative
    a. Background
    b. Considerations for Potential Model Expansion
    I. Proposed Add-On Payments for New Services and Technologies
    1. Background
    2. Public Input Before Publication of a Notice of Proposed 
Rulemaking on Add-On Payments
    3. Implementation of ICD-10-PCS Section ``X'' Codes for Certain 
New Medical Services and Technologies for FY 2016
    4. Proposed FY 2016 Status of Technologies Approved for FY 2015 
Add-On Payments
    a. Glucarpidase (Voraxaze[supreg])
    b. Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm (AAA) 
Endovascular Graft
    c. KcentraTM
    d. Argus[supreg] II Retinal Prosthesis System
    e. Zilver[supreg]PTX[supreg] Drug-Eluting Peripheral Stent
    f. CardioMEMSTM HF (Heart Failure) Monitoring System
    g. MitraClip[supreg] System
    h. Responsive Neurostimulator (RNS[supreg] System)
    5. FY 2016 Applications for New Technology Add-On Payments
    a. Angel Medical Guardian[supreg] Ischemia Monitoring Device
    b. Blinatumomab (BLINCYTOTM)
    c. Ceftazidime Avibactam (AVYCAZ)
    d. DIAMONDBACK[supreg] 360 Coronary Orbital Atherectomy System
    e. CRESEMBA[supreg] (Isavuconazonium)
    f. Idarucizumab
    g. LUTONIX[supreg] Drug Coated Balloon (DCB) Percutaneous 
Transluminal Angioplasty (PTA) and 
IN.PACTTMAdmiralTM Pacliaxel Coated 
Percutaneous Transluminal Angioplasty (PTA) Balloon Catheter
    h. VERASENSETM Knee Balancer System (VKS)
    i. WATCHMAN[supreg] Left Atrial Appendage Closure Technology
III. Proposed Changes to the Hospital Wage Index for Acute Care 
Hospitals
    A. Background
    1. Legislative Authority
    2. Core-Based Statistical Areas (CBSAs) for the Hospital Wage 
Index
    B. Worksheet S-3 Wage Data for the Proposed FY 2016 Wage Index
    1. Included Categories of Costs
    2. Excluded Categories of Costs
    3. Use of Wage Index Data by Suppliers and Providers Other Than 
Acute Care Hospitals Under the IPPS
    C. Verification of Worksheet S-3 Wage Data
    D. Method for Computing the Proposed FY 2016 Unadjusted Wage 
Index
    E. Proposed Occupational Mix Adjustment to the Proposed FY 2016 
Wage Index
    1. Development of Data for the Proposed FY 2016 Occupational Mix 
Adjustment Based on the 2013 Medicare Wage Index Occupational Mix 
Survey
    2. New 2013 Occupational Mix Survey Data for the Proposed FY 
2016 Wage Index
    3. Calculation of the Proposed Occupational Mix Adjustment for 
FY 2016
    F. Analysis and Implementation of the Proposed Occupational Mix 
Adjustment and the Proposed FY 2016 Occupational Mix Adjusted Wage 
Index
    G. Transitional Wage Indexes
    1. Background
    2. Transition for Hospitals in Urban Areas That Became Rural
    3. Transition for Hospitals Deemed Urban Under Section 
1886(d)(8)(B) of the Act Where the Urban Area Became Rural Under the 
New OMB Delineations
    4. Expiring Transition for Hospitals That Experience a Decrease 
in Wage Index under the New OMB Delineations
    5. Budget Neutrality
    H. Proposed Application of the Rural, Imputed, and Frontier 
Floors
    1. Proposed Rural Floor

[[Page 24328]]

    2. Proposed Imputed Floor for FY 2016
    3. Proposed State Frontier Floor
    I. Proposed FY 2016 Wage Index Tables
    J. Revisions to the Wage Index Based on Hospital Redesignations 
and Reclassifications
    1. General Policies and Effects of Reclassification and 
Redesignation
    2. FY 2016 MGCRB Reclassifications and Redesignation Issues
    a. FY 2016 Reclassification Requests and Approvals
    b. Applications for Reclassifications for FY 2017
    3. Redesignations of Hospitals Under Section 1886(d)(8)(B) of 
the Act (Lugar)
    4. Waiving Lugar Redesignation for the Out-Migration Adjustment
    K. Proposed Out-Migration Adjustment Based on Commuting Patterns 
of Hospital Employees
    1. Background
    2. New Data Source for the Proposed FY 2016 Out-Migration 
Adjustment
    3. Proposed FY 2016 Out-Migration Adjustment
    4. Use of Out-Migration Data Applied for FY 2014 or FY 2015 for 
3 Years
    L. Process for Requests for Wage Index Data Corrections
    M. Labor-Related Share for the Proposed FY 2016 Wage Index
    N. Proposed Changes to 3-Year Average for the FY 2017 Wage Index 
Pension Costs and Proposed Change to Wage Index Timeline Regarding 
Pension Costs for FY 2017 and Subsequent Years
    O. Clarification of Allocation of Pension Costs for the Wage 
Index
IV. Other Decisions and Proposed Changes to the IPPS for Operating 
Costs and Indirect Medical Education (IME) Costs
    A. Proposed Changes in the Inpatient Hospital Updates for FY 
2016 (Sec. Sec.  412.64(d) and 412.211(c))
    1. Proposed FY 2016 Inpatient Hospital Update
    2. Proposed FY 2016 Puerto Rico Hospital Update
    B. Rural Referral Centers (RRCs): Proposed Annual Updates to 
Case-Mix Index (CMI) and Discharge Criteria (Sec.  412.96)
    1. Case-Mix Index (CMI)
    2. Discharges
    C. Indirect Medical Education (IME) Payment Adjustment for FY 
2016 (Sec.  412.105)
    D. Proposed FY 2016 Payment Adjustment for Medicare 
Disproportionate Share Hospitals (DSHs) (Sec.  412.106)
    1. Background
    2. Impact on Medicare DSH Payment Adjustment of the Continued 
Implementation of New OMB Labor Market Area Delineations
    3. Payment Adjustment Methodology for Medicare Disproportionate 
Share Hospitals (DSHs) Under Section 3133 of the Affordable Care Act
    a. General Discussion
    b. Eligibility for Empirically Justified Medicare DSH Payments 
and Uncompensated Care Payments
    c. Empirically Justified Medicare DSH Payments
    d. Uncompensated Care Payments
    E. Hospital Readmissions Reduction Program: Proposed Changes for 
FY 2016 Through FY 2017 (Sec. Sec.  412.150 Through 412.154)
    1. Statutory Basis for the Hospital Readmissions Reduction 
Program
    2. Regulatory Background
    3. Overview of Proposed Policies Changes for the FY 2016 and FY 
2017 Hospital Readmissions Reduction Program
    4. Proposed Refinement of Hospital 30-Day, All Cause, Risk-
Standardized Readmission Rate (RSSR) Following Pneumonia 
Hospitalization Measure Cohort (NQF #0506) for FY 2017 Payment 
Determination and Subsequent Years
    a. Background
    b. Overview of Measure Cohort Change
    c. Risk Adjustment
    d. Anticipated Effect of Refinement of Hospital 30-Day, All-
Cause, Risk-Standardized Readmission Rate (RSSR) Following Pneumonia 
Hospitalization Measure (NQF #0506) Cohort
    e. Calculating the Excess Readmissions Ratio
    5. Maintenance of Technical Specifications for Quality Measures
    6. Floor Adjustment Factor for FY 2016 (Sec.  412.154(c)(2))
    7. Proposed Applicable Period for FY 2016
    8. Proposed Calculation of Aggregate Payments for Excess 
Readmissions for FY 2016
    a. Background
    b. Proposed Calculation of Aggregate Payments for Excess 
Readmissions for FY 2016
    9. Proposed Extraordinary Circumstances Exception Policy for the 
Hospital Readmissions Reduction Program Beginning FY 2016 and for 
Subsequent Years
    a. Background
    b. Requests for an Extraordinary Circumstances Exception
    F. Hospital Value-Based Purchasing (VBP) Program: Proposed 
Policy Changes for the FY 2018 Program Year and Subsequent Years
    1. Background
    a. Statutory Background and Overview of Past Program Years
    b. FY 2016 Program Year Payment Details
    2. Proposed Retention, Removal, Expansion, and Updating of 
Quality Measures for FY 2018 Program Year
    a. Retention of Previously Adopted Hospital VBP Program Measures 
for the FY 2018 Program Year
    b. Proposed Removal of Two Measures
    c. Proposed New Measure for the FY 2018 Program Year: 3-Item 
Care Transition Measure (CTM-3) (NQF #0228)
    d. Proposed Removal of Clinical Care--Process Subdomain for the 
FY 2018 Program Year and Subsequent Years
    e. NHSN Measures Standard Population Data
    f. Summary of Previously Adopted and Newly Proposed Measures for 
the FY 2018 Program Year
    3. Previously Adopted and Newly Proposed Measures for the FY 
2019, FY 2021, and Subsequent Program Years
    a. Intent To Propose in Future Rulemaking To Include Selected 
Ward (Non-Intensive Care Unit (ICU)) Locations in Certain NHSN 
Measures Beginning With the FY 2019 Program Year
    b. Proposed New Measure for the FY 2021 Program Year: Hospital 
30-Day, All-Cause, Risk-Standardized Mortality Rate Following 
Chronic Obstructive Pulmonary Disease (COPD) Hospitalization (NQF 
#1893)
    c. Summary of Previously Adopted and Newly Proposed Measures for 
the FY 2019 and FY 2021 and Subsequent Program Years
    4. Possible Measure Topics for Future Program Years
    5. Previously Adopted and Newly Proposed Baseline and 
Performance Periods for the FY 2018 Program Year
    a. Background
    b. Proposed Baseline and Performance Periods for the Patient and 
Caregiver-Centered Experience of Care/Care Coordination Domain for 
the FY 2018 Program Year
    c. Proposed Baseline and Performance Periods for NHSN Measures 
and PC-01 in the Safety Domain for the FY 2018 Program Year
    d. Proposed Baseline and Performance Periods for the Efficiency 
and Cost Reduction Domain for the FY 2018 Program Year
    e. Summary of Previously Finalized and Newly Proposed Baseline 
and Performance Periods for the FY 2018 Program Year
    6. Previously Adopted and Newly Proposed Baseline and 
Performance Periods for Future Program Years
    a. Previously Adopted Baseline and Performance Periods for the 
FY 2019 Program
    b. Proposed Baseline and Performance Periods for the PSI-90 
Measure in the Safety Domain in the FY 2020 Program Years
    c. Proposed Baseline and Performance Periods for the Clinical 
Care Domain for the FY 2021 Program Year
    7. Proposed Performance Standards for the Hospital VBP Program
    a. Background
    b. Technical Updates
    c. Proposed Performance Standards for the FY 2018 Program Year
    d. Previously Adopted Performance Standards for Certain Measures 
for the FY 2019 Program Year
    e. Previously Adopted and Newly Proposed Performance Standards 
for Certain Measures for the FY 2020 Program Year
    f. Proposed Performance Standards for Certain Measures for the 
FY 2021 Program Year
    8. Proposed FY 2018 Program Year Scoring Methodology
    a. Proposed Domain Weighting for the FY 2018 Program Year for 
Hospitals That Receive a Score on All Domains
    b. Proposed Domain Weighting for the FY 2018 Program Year for 
Hospitals Receiving Scores on Fewer Than Four Domains

[[Page 24329]]

    G. Proposed Changes to the Hospital-Acquired Condition (HAC) 
Reduction Program
    1. Background
    2. Statutory Basis for the HAC Reduction Program
    3. Overview of Previous HAC Reduction Program Rulemaking
    4. Implementation of the HAC Reduction Program for FY 2016
    5. Proposed Changes for Implementation of the HAC Reduction 
Program for FY 2017
    a. Proposed Applicable Time Period for the FY 2017 HAC Reduction 
Program
    b. Proposed Narrative Rule Used in Calculation of the Domain 2 
Score for the FY 2017 HAC Reduction Program
    c. Proposed Domain 1 and Domain 2 Weights for the FY 2017 HAC 
Reduction Program
    6. Proposed Measure Refinements for the FY 2018 HAC Reduction 
Program
    a. Proposal To Include Select Ward (Non-Intensive Care Unit 
(ICU)) Locations in Certain CDC NHSN Measures Beginning in the FY 
2018 Program Year
    b. Update to CDC NHSN Measures Standard Population Data
    7. Maintenance of Technical Specifications for Quality Measures
    8. Proposed Extraordinary Circumstances Exception Policy for the 
HAC Reduction Program Beginning in FY 2016 and for Subsequent Years
    a. Background
    b. Requests for an Extraordinary Circumstances Exception
    H. Proposed Elimination of Simplified Cost Allocation 
Methodology
    1. Background
    2. Proposed Changes
    I. Rural Community Hospital Demonstration Program
    1. Background
    2. Proposed FY 2016 Budget Neutrality Offset Amount
    J. Proposed Changes to MS-DRGs Subject to the Postacute Care 
Transfer Policy (Sec.  412.4)
    1. Background
    2. Proposed Changes to the Postacute Care Transfer MS-DRGs
    K. Short Inpatient Hospital Stays
V. Proposed Changes to the IPPS for Capital-Related Costs
    A. Overview
    B. Additional Provisions
    1. Exception Payments
    2. New Hospitals
    3. Hospitals Located in Puerto Rico
    C. Proposed Annual Update for FY 2016
VI. Proposed Changes for Hospitals Excluded From the IPPS
VII. Proposed Changes to the Long-Term Care Hospital Prospective 
Payment System (LTCH PPS) for FY 2016
    A. Background of the LTCH PPS
    1. Legislative and Regulatory Authority
    2. Criteria for Classification as an LTCH
    a. Classification as an LTCH
    b. Hospitals Excluded From the LTCH PPS
    3. Limitation on Charges to Beneficiaries
    4. Administrative Simplification Compliance Act (ASCA) and 
Health Insurance Portability and Accountability Act (HIPAA) 
Compliance
    B. Proposed Application of Site Neutral Payment Rate (Proposed 
New Sec.  412.522)
    1. Overview
    2. Proposed Application of the Site Neutral Payment Rate Under 
the LTCH PPS
    3. Criteria for Exclusion From the Site Neutral Payment Rate
    a. Statutory Provisions
    b. Proposed Implementation of Criterion for a Principal 
Diagnosis Relating to a Psychiatric Diagnosis or to Rehabilitation
    c. Proposed Addition of Definition of ``Subsection (d) 
Hospital'' to LTCH Regulations
    d. Proposed Interpretation of ``Immediately Preceded'' by a 
Subsection (d) Hospital Discharge
    e. Proposed Implementation of Intensive Care Unit (ICU) 
Criterion
    f. Proposed Implementation of the Ventilator Criterion
    4. Proposed Determination of the Site Neutral Payment Rate 
(Proposed New Sec.  412.522(c))
    a. General
    b. Proposed Blended Payment Rate for FY 2016 and FY 2017
    c. Proposed LTCH PPS Standard Federal Payment Rate
    5. Proposed Application of Certain Exiting LTCH PPS Payment 
Adjustments to Payments Made Under the Site Neutral Payment Rate
    6. Proposals Relating to the LTCH Discharge Payment Percentage
    7. Additional LTCH PPS Policy Considerations Related to the 
Implementation of the Site Neutral Payment Rate Required by Section 
1206(a) of Public Law 113-67
    a. MS-LTC-DRG Relative Payment Weights
    b. High-Cost Outliers
    c. Limitation on Charges to Beneficiaries
    C. Proposed Medicare Severity Long-Term Care Diagnosis-Related 
Group (MS-LTC-DRG) Classifications and Relative Weights for FY 2016
    1. Background
    2. Patient Classifications into MS-LTC-DRGs
    a. Background
    b. Proposed Changes to the MS-LTC-DRGs for FY 2016
    3. Development of the Proposed FY 2016 MS-LTC-DRG Relative 
Weights
    a. General Overview of the Development of the MS-LTC-DRG 
Relative Weights
    b. Development of the Proposed MS-LTC-DRG Relative Weights for 
FY 2016
    c. Data
    d. Hospital-Specific Relative Value (HSRV) Methodology
    e. Treatment of Severity Levels in Developing the Proposed MS-
LTC-DRG Relative Weights
    f. Proposed Low-Volume MS-LTC-DRGs
    g. Steps for Determining the Proposed FY 2016 MS-LTC-DRG 
Relative Weights
    D. Proposed Changes to the LTCH PPS Standard Payment Rates for 
FY 2016
    1. Overview of Development of the LTCH PPS Standard Federal 
Payment Rates
    2. Proposed FY 2016 LTCH PPS Annual Market Basket Update
    a. Overview
    b. Proposed Revision of Certain Market Basket Updates as 
Required by the Affordable Care Act
    c. Proposed Adjustment to the Annual Update to the LTCH PPS 
Standard Federal Rate Under the Long-Term Care Hospital Quality 
Reporting Program (LTCH QRP)
    d. Proposed Market Basket Under the LTCH PPS for FY 2016
    e. Proposed Annual Market Basket Update for LTCHs for FY 2016
    E. Moratoria on the Establishment of LTCHs and LTCH Satellite 
Facilities and on the Increase in Number of Beds in Existing LTCHs 
and LTCH Satellite Facilities
    F. Proposed Changes to Average Length of Stay Criterion Under 
Public Law 113-67 (Sec.  412.23)
VIII. Proposed Quality Data Reporting Requirements for Specific 
Providers and Suppliers for FY 2016
    A. Hospital Inpatient Quality Reporting (IQR) Program
    1. Background
    a. History of the Hospital IQR Program
    b. Maintenance of Technical Specifications for Quality Measures
    c. Public Display of Quality Measures
    2. Process for Retaining Previously Adopted Hospital IQR Program 
Measures for Subsequent Payment Determinations
    3. Removal and Suspension of Hospital IQR Program Measures
    a. Considerations in Removing Quality Measures From the Hospital 
IQR Program
    b. Proposed Removal of Hospital IQR Program Measures for the FY 
2018 Payment Determination and Subsequent Years
    4. Previously Adopted Hospital IQR Program Measures for the FY 
2017 Payment Determination and Subsequent Years
    a. Background
    b. NHSN Measures Standard Population Data
    5. Expansion and Updating of Quality Measures
    6. Proposed Refinements of Existing Measures in the Hospital IQR 
Program
    a. Proposed Refinement of Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate (RSMR) Following Pneumonia 
Hospitalization (NQF #0468) Measure Cohort
    b. Proposed Refinement of Hospital 30-Day, All-Cause, Risk-
Standardized Readmission Rate (RSRR) Following Pneumonia 
Hospitalization (NQF #0468) Measure Cohort
    7. Proposed Additional Hospital IQR Program Measures for the FY 
2018 Payment Determination and Subsequent Years
    a. Hospital Survey on Patient Safety Culture
    b. Clinical Episode-Based Payment Measures
    c. Hospital-Level, Risk-Standardized Payment Associated With a 
90-Day Episode-of-Care for Elective Primary Total Hip Arthroplasty 
(THA) and/or Total Knee Arthroplasty (TKA)

[[Page 24330]]

    d. Excess Days in Acute Care After Hospitalization for Acute 
Myocardial Infarction
    e. Excess Days in Acute Care After Hospitalization for Heart 
Failure
    f. Summary of Previously Adopted and Proposed Hospital IQR 
Program Measure Set for the FY 2018 Payment Determination and 
Subsequent Years
    8. Electronic Clinical Quality Measures
    a. Previously Adopted Voluntarily Reported Electronic Clinical 
Quality Measures for the FY 2017 Payment Determination
    b. Clarification of the Venous Thromboembolism (VTE) Prophylaxis 
(STK-01) Measure (NQF #0434)
    c. Proposed Requirements for Hospitals To Report Electronic 
Clinical Quality Measures for the FY 2018 Payment Determination and 
Subsequent Years
    9. Future Considerations for Electronically Specified Measures: 
Consideration To Implement a New Type of Measure That Utilizes Core 
Clinical Data Elements
    a. Background
    b. Overview of Core Clinical Data Elements
    c. Core Clinical Data Elements Development
    d. Core Clinical Data Elements Feasibility Testing Using 
Readmission and Mortality Models
    e. Use of Core Clinical Data Elements in Hospital Quality 
Measures for the Hospital IQR Program
    f. Content Exchange Standard Considerations for Core Clinical 
Data Elements
    10. Form, Manner, and Timing of Quality Data Submission
    a. Background
    b. Procedural Requirements for the FY 2018 Payment Determination 
and Subsequent Years
    c. Data Submission Requirements for Chart-Abstracted Measures
    d. Alignment of the Medicare EHR Incentive Program Reporting for 
Eligible Hospitals and CAHs With the Hospital IQR Program
    e. Sampling and Case Thresholds for the FY 2018 Payment 
Determination and Subsequent Years
    f. HCAHPS Requirements for the FY 2018 Payment Determination and 
Subsequent Years
    g. Data Submission Requirements for Structural Measures for the 
FY 2018 Payment Determination and Subsequent Years
    h. Data Submission and Reporting Requirements for Healthcare-
Associated Infection (HAI) Measures Reported via NHSN
    11. Proposed Modifications to the Existing Processes for 
Validation of Hospital IQR Program Data
    a. Background
    b. Proposed Modifications to the Existing Processes for 
Validation of Chart-Abstracted Hospital IQR Program Data
    12. Data Accuracy and Completeness Acknowledgement Requirements 
for the FY 2018 Payment Determination and Subsequent Years
    13. Public Display Requirements for the FY 2018 Payment 
Determination and Subsequent Years
    14. Reconsideration and Appeal Procedures for the FY 2018 
Payment Determination and Subsequent Years
    15. Hospital IQR Program Extraordinary Circumstances Extensions 
or Exemptions
    B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program
    1. Statutory Authority
    2. Proposed Removal of Six Surgical Care Improvement Project 
(SCIP) Measures From the PCHQR Program Beginning With Fourth Quarter 
(Q4) 2015 Discharges and for Subsequent Years
    3. Proposed New Quality Measures Beginning With the FY 2018 
Program
    a. Considerations in the Selection of Quality Measures
    b. Summary of Proposed New Measures
    c. CDC NHSN Facility-Wide Inpatient Hospital-Onset Clostridium 
difficile (C. difficile) Infection (CDI) Outcome Measure (NQF #1717)
    d. CDC NHSN Facility-Wide Inpatient Hospital-Onset Methicillin-
Resistant Staphylococcus Aureus (MSRA) Bacteremia Outcome Measure 
(NQF #1716)
    e. CDC NHSN Influenza Vaccination Coverage Among Healthcare 
Personnel (HCP) Measure (NQF #0431) (CDC NHSN HCP Measure)
    4. Possible New Quality Measure Topics for Future Years
    5. Maintenance of Technical Specifications for Quality Measures
    6. Public Display Requirements
    a. Background
    b. Proposed Additional Public Display Requirements
    7. Form, Manner, and Timing of Data Submission
    a. Background
    b. Reporting Requirements for the Proposed New Measures: CDC 
NHSN CDI (NQF #1717), CDC NHSN MRSA (NQF #1716), and CDC NHSN HCP 
(NQF #0431) Measures
    C. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)
    1. Background and Statutory Authority
    2. General Considerations Used for Selection, Resource Use, and 
Other Quality Measures for the LTCH QRP
    3. Policy for Retention of LTCH QRP Measures Adopted for 
Previous Payment Determinations
    4. Policy for Adopting Changes to LTCH QRP Measures
    5. Previously Adopted Quality Measures
    a. Previously Adopted Quality Measures for the FY 2015 and FY 
2016 Payment Determinations and Subsequent Years
    b. Previously Adopted Quality Measures for the FY 2017 and FY 
2018 Payment Determinations and Subsequent Years
    6. Previously Adopted LTCH QRP Quality Measures for the FY 2018 
Payment Determinations and Subsequent Years
    a. Proposal To Reflect NQF Endorsement: All-Cause Unplanned 
Readmission Measure for 30 Days Post-Discharge From LTCHs (NQF 
#2512)
    b. Proposal To Address the IMPACT Act of 2014: Quality Measure 
Addressing the Domain of Skin Integrity and Changes in Skin 
Integrity: Percent of Residents or Patients With Pressure Ulcers 
That Are New or Worsened (Short Stay) (NQF #0678)
    c. Proposal To Address the IMPACT Act of 2014: Quality Measure 
Addressing the Domain of Incidence of Major Falls: Application of 
Percent of Residents Experiencing One or More Falls With Major 
Injury (Long Stay) (NQF #0674)
    d. Proposal To Address the IMPACT Act of 2014: Quality Measure 
Addressing the Domain of Functional Status, Cognitive Function, and 
Changes in Function and Cognitive Function: Application of Percent 
of LTCH Patients With an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (NQF #2631; Under 
NQF Review)
    7. LTCH QRP Quality Measures for the FY 2019 Payment 
Determination and Subsequent Years
    8. LTCH QRP Quality Measures and Concepts Under Consideration 
for Future Years
    9. Form, Manner, and Timing of Quality Data Submission for the 
FY 2016 Payment Determinations and Subsequent Years
    a. Background
    b. Proposed Timing for New LTCHs To Begin Reporting Data to CMS 
for the FY 2017 Payment Determinations and Subsequent Years
    c. Proposed Revisions to Previously Adopted Data Submission 
Timelines Under the LTCH QRP for the FY 2017 and FY 2018 Payment 
Determinations and Subsequent Years and Proposed Data Collection and 
Data Submission Timelines for Quality Measures Proposed in This 
Proposed Rule
    10. Previously Adopted LTCH QRP Data Completion Thresholds for 
the FY 2016 Payment Determination and Subsequent Years
    11. Future LTCH QRP Data Validation Process
    12. Proposed Public Display of Quality Measure Data for the LTCH 
QRP
    13. Previously Adopted and Proposed LTCH QRP Reconsideration and 
Appeals Procedures for the FY 2017 Payment Determination and 
Subsequent Years
    14. Previously Adopted and Proposed LTCH QRP Submission 
Exception and Extension Requirements for the FY 2017 Payment 
Determination and Subsequent Years
    D. Clinical Quality Measurement for Eligible Hospitals and 
Critical Access Hospitals Participating in the EHR Incentive 
Programs in 2016
    1. Background
    2. CQM Reporting for the Medicare and Medicaid EHR Incentive 
Programs in 2016
    a. Background
    b. Proposed CQM Reporting Period for the Medicare and Medicaid 
EHR Incentive Programs for CY 2016
    c. CQM Form and Method for the Medicare EHR Incentive Programs 
for 2016
    3. Certified EHR Technology for CQMs for the EHR Incentive 
Programs in 2016

[[Page 24331]]

    a. Edition of Certified EHR Technology Requirements for 2016
    b. ``CQM--Report'' Certification Criterion in ONC's 2015 Edition 
Proposed Rule
    4. CQM Development and Certification Cycle
IX. MedPAC Recommendations
X. Other Required Information
    A. Requests for Data From the Public
    B. Collection of Information Requirements
    1. Statutory Requirement for Solicitation of Comments
    2. ICRs for Add-On Payments for New Services and Technologies
    3. ICRs for the Proposed Occupational Mix Adjustment to the 
Proposed FY 2016 Wage Index (Hospital Wage Index Occupational Mix 
Survey)
    4. Hospital Applications for Geographic Reclassifications by the 
MGCRB
    5. ICRs for the Hospital Inpatient Quality Reporting (IQR) 
Program
    6. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 
Program
    7. ICRs for Hospital Value-Based Purchasing (VBP) Program
    8. ICRs for the Long-Term Care Hospital Quality Reporting 
Program (LTCHQR)
    C. Response to Comments
Regulation Text
Addendum--Proposed Schedule of Standardized Amounts, Update Factors, 
and Rate-of-Increase Percentages Effective With Cost Reporting 
Periods Beginning on or After October 1, 2015 and Proposed Payment 
Rates for LTCHs Effective With Discharges Occurring on or After 
October 1, 2015
I. Summary and Background
II. Proposed Changes to the Prospective Payment Rates for Hospital 
Inpatient Operating Costs for Acute Care Hospitals for FY 2016
    A. Calculation of the Adjusted Standardized Amount
    B. Adjustments for Area Wage Levels and Cost-of-Living
    C. Proposed MS-DRG Relative Weights
    D. Calculation of the Prospective Payment Rates
III. Proposed Changes to Payment Rates for Acute Care Hospital 
Inpatient Capital-Related Costs for FY 2016
    A. Determination of Federal Hospital Inpatient Capital-Related 
Prospective Payment Rate Update
    B. Calculation of the Proposed Inpatient Capital-Related 
Prospective Payments for FY 2016
    C. Capital Input Price Index
    IV. Proposed Changes to Payment Rates for Excluded Hospitals: 
Rate-of-Increase Percentages for FY 2016
    V. Proposed Updates to the Payment Rates for the LTCH PPS for FY 
2016
    A. Proposed LTCH PPS Standard Federal Rate for FY 2016
    1. Background
    2. Development of the Proposed FY 2016 LTCH PPS Standard Federal 
Rate
    B. Proposed Adjustment for Area Wage Levels Under the LTCH PPS 
Standard Federal Payment Rate for FY 2016
    1. Background
    2. Proposed Geographic Classifications (Labor Market Areas) for 
the LTCH PPS Standard Federal Payment Rate
    3. Proposed Labor-Related Share for the LTCH PPS Standard 
Federal Payment Rate
    4. Proposed Wage Index for FY 2016 for the LTCH PPS Standard 
Federal Payment Rate
    5. Proposed Budget Neutrality Adjustment for Proposed Changes to 
the LTCH PPS Standard Federal Payment Rate Area Wage Level 
Adjustment
    C. Proposed LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs 
Located in Alaska and Hawaii
    D. Proposed Adjustment for LTCH PPS High-Cost Outlier (HCO) 
Cases
    1. Overview
    2. Determining Proposed LTCH CCRs Under the LTCH PPS
    3. Proposed High-Cost Outlier Payments for LTCH PPS Standard 
Federal Payment Rate Cases
    4. Proposed High-Cost Outlier Payments for Site Neutral Payment 
Rate Cases
    E. Proposed Update to the IPPS Comparable/Equivalent Amounts To 
Reflect the Statutory Changes to the IPPS DSH Payment Adjustment 
Methodology
    F. Computing the Proposed Adjusted LTCH PPS Federal Prospective 
Payments for FY 2016
VI. Tables Referenced in This Proposed Rule and Available Through 
the Internet on the CMS Web site
Appendix A--Economic Analyses
I. Regulatory Impact Analysis
    A. Introduction
    B. Need
    C. Objectives of the IPPS
    D. Limitations of Our Analysis
    E. Hospitals Included in and Excluded From the IPPS
    F. Effects on Hospitals and Hospital Units Excluded From the 
IPPS
    G. Quantitative Effects of the Proposed Policy Changes Under the 
IPPS for Operating Costs
    1. Basis and Methodology of Estimates
    2. Analysis of Table I
    3. Impact Analysis of Table II
    H. Effects of Other Proposed Policy Changes
    1. Effects of Proposed Policy on MS-DRGs for Preventable HACs, 
Including Infections
    2. Effects of Proposed Policy Relating to New Medical Service 
and Technology Add-On Payments
    3. Effects of Proposed Changes in Medicare DSH Payments for FY 
2016
    4. Effects of Proposed Reductions Under the Hospital 
Readmissions Reduction Program
    5. Effects of Proposed Changes Under the FY 2016 Hospital Value-
Based Purchasing (VBP) Program
    6. Effects of Proposed Changes to the HAC Reduction Program for 
FY 2016
    7. Effects of Proposed Elimination of the Simplified Cost 
Allocation Methodology
    8. Effects of Implementation of Rural Community Hospital 
Demonstration Program
    9. Effects of Proposed Changes to List of MS-DRGs Subject to 
Postacute Care Transfer and DRG Special Pay Policy
    I. Effects of Proposed Changes in the Capital IPPS
    1. General Considerations
    2. Results
    J. Effects of Proposed Payment Rate Changes and Proposed Policy 
Changes Under the LTCH PPS
    1. Introduction and General Considerations
    2. Impact on Rural Hospitals
    3. Anticipated Effects of Proposed LTCH PPS Payment Rate Changes 
and Proposed Policy Changes
    4. Effect on the Medicare Program
    5. Effect on Medicare Beneficiaries
    K. Effects of Proposed Requirements for Hospital Inpatient 
Quality Reporting (IQR) Program
    L. Effects of Proposed Requirements for the PPS-Exempt Cancer 
Hospital Quality Reporting (PCHQR) Program for FY 2016
    M. Effects of Proposed Requirements for the LTCH Quality 
Reporting Program (LTCH QRP) for FY 2016 Through FY 2020
    N. Effects of Proposed Changes to Clinical Quality Measurement 
for Eligible Hospitals and Critical Access Hospitals Participating 
in the EHR Incentive Programs in 2016
II. Alternatives Considered
III. Overall Conclusion
    A. Acute Care Hospitals
    B. LTCHs
IV. Accounting Statements and Tables
    A. Acute Care Hospitals
    B. LTCHs
V. Regulatory Flexibility Act (RFA) Analysis
VI. Impact on Small Rural Hospitals
VII. Unfunded Mandate Reform Act (UMRA) Analysis
VIII. Executive Order 12866
Appendix B: Recommendation of Update Factors for Operating Cost 
Rates of Payment for Inpatient Hospital Services
I. Background
II. Proposed Inpatient Hospital Updates for FY 2016
    A. Proposed FY 2016 Inpatient Hospital Update
    B. Proposed Update for SCHs for FY 2016
    C. Proposed FY 2016 Puerto Rico Hospital Update
    D. Proposed Update for Hospitals Excluded From the IPPS for FY 
2016
    E. Proposed Update for LTCHs for FY 2016
III. Secretary's Recommendation
IV. MedPAC Recommendation for Assessing Payment Adequacy and 
Updating Payments in Traditional Medicare

I. Executive Summary and Background

A. Executive Summary

1. Purpose and Legal Authority
    This proposed rule would make payment and policy changes under the 
Medicare inpatient prospective payment systems (IPPS) for operating and 
capital-related costs of acute care hospitals as well as for certain 
hospitals and hospital units excluded from the IPPS. In addition, it 
would make payment and policy changes for inpatient hospital services 
provided by long-term care hospitals (LTCHs) under the long-term care 
hospital prospective payment

[[Page 24332]]

system (LTCH PPS). It also would make policy changes to programs 
associated with Medicare IPPS hospitals, IPPS-excluded hospitals, and 
LTCHs.
    Under various statutory authorities, we are proposing to make 
changes to the Medicare IPPS, to the LTCH PPS, and to other related 
payment methodologies and programs for FY 2016 and subsequent fiscal 
years. These statutory authorities include, but are not limited to, the 
following:
     Section 1886(d) of the Social Security Act (the Act), 
which sets forth a system of payment for the operating costs of acute 
care hospital inpatient stays under Medicare Part A (Hospital 
Insurance) based on prospectively set rates. Section 1886(g) of the Act 
requires that, instead of paying for capital-related costs of inpatient 
hospital services on a reasonable cost basis, the Secretary use a 
prospective payment system (PPS).
     Section 1886(d)(1)(B) of the Act, which specifies that 
certain hospitals and hospital units are excluded from the IPPS. These 
hospitals and units are: Rehabilitation hospitals and units; LTCHs; 
psychiatric hospitals and units; children's hospitals; cancer 
hospitals; and short-term acute care hospitals located in the Virgin 
Islands, Guam, the Northern Mariana Islands, and American Samoa. 
Religious nonmedical health care institutions (RNHCIs) are also 
excluded from the IPPS.
     Sections 123(a) and (c) of Public Law 106-113 and section 
307(b)(1) of Public Law 106-554 (as codified under section 1886(m)(1) 
of the Act), which provide for the development and implementation of a 
prospective payment system for payment for inpatient hospital services 
of long-term care hospitals (LTCHs) described in section 
1886(d)(1)(B)(iv) of the Act.
     Sections 1814(l), 1820, and 1834(g) of the Act, which 
specify that payments are made to critical access hospitals (CAHs) 
(that is, rural hospitals or facilities that meet certain statutory 
requirements) for inpatient and outpatient services and that these 
payments are generally based on 101 percent of reasonable cost.
     Section 1866(k) of the Act, as added by section 3005 of 
the Affordable Care Act, which establishes a quality reporting program 
for hospitals described in section 1886(d)(1)(B)(v) of the Act, 
referred to as ``PPS-Exempt Cancer Hospitals.''
     Section 1886(d)(4)(D) of the Act, which addresses certain 
hospital-acquired conditions (HACs), including infections. Section 
1886(d)(4)(D) of the Act specifies that, by October 1, 2007, the 
Secretary was required to select, in consultation with the Centers for 
Disease Control and Prevention (CDC), at least two conditions that: (a) 
Are high cost, high volume, or both; (b) are assigned to a higher 
paying MS-DRG when present as a secondary diagnosis (that is, 
conditions under the MS-DRG system that are complications or 
comorbidities (CCs) or major complications or comorbidities (MCCs); and 
(c) could reasonably have been prevented through the application of 
evidence-based guidelines. Section 1886(d)(4)(D) of the Act also 
specifies that the list of conditions may be revised, again in 
consultation with CDC, from time to time as long as the list contains 
at least two conditions. Section 1886(d)(4)(D)(iii) of the Act requires 
that hospitals, effective with discharges occurring on or after October 
1, 2007, submit information on Medicare claims specifying whether 
diagnoses were present on admission (POA). Section 1886(d)(4)(D)(i) of 
the Act specifies that effective for discharges occurring on or after 
October 1, 2008, Medicare no longer assigns an inpatient hospital 
discharge to a higher paying MS-DRG if a selected condition is not POA.
     Section 1886(a)(4) of the Act, which specifies that costs 
of approved educational activities are excluded from the operating 
costs of inpatient hospital services. Hospitals with approved graduate 
medical education (GME) programs are paid for the direct costs of GME 
in accordance with section 1886(h) of the Act. A payment for indirect 
medical education (IME) is made under section 1886(d)(5)(B) of the Act.
     Section 1886(b)(3)(B)(viii) of the Act, which requires the 
Secretary to reduce the applicable percentage increase in payments to a 
subsection (d) hospital for a fiscal year if the hospital does not 
submit data on measures in a form and manner, and at a time, specified 
by the Secretary.
     Section 1886(o) of the Act, which requires the Secretary 
to establish a Hospital Value-Based Purchasing (VBP) Program under 
which value-based incentive payments are made in a fiscal year to 
hospitals meeting performance standards established for a performance 
period for such fiscal year.
     Section 1886(p) of the Act, as added by section 3008 of 
the Affordable Care Act, which establishes an adjustment to hospital 
payments for hospital-acquired conditions (HACs), or a Hospital-
Acquired Condition (HAC) Reduction Program, under which payments to 
applicable hospitals are adjusted to provide an incentive to reduce 
hospital-acquired conditions.
     Section 1886(q) of the Act, as added by section 3025 of 
the Affordable Care Act and amended by section 10309 of the Affordable 
Care Act, which establishes the ``Hospital Readmissions Reduction 
Program'' effective for discharges from an ``applicable hospital'' 
beginning on or after October 1, 2012, under which payments to those 
hospitals under section 1886(d) of the Act will be reduced to account 
for certain excess readmissions.
     Section 1886(r) of the Act, as added by section 3133 of 
the Affordable Care Act, which provides for a reduction to 
disproportionate share hospital payments under section 1886(d)(5)(F) of 
the Act and for a new uncompensated care payment to eligible hospitals. 
Specifically, section 1886(r) of the Act now requires that, for fiscal 
year 2014 and each subsequent fiscal year, subsection (d) hospitals 
that would otherwise receive a disproportionate share hospital payment 
made under section 1886(d)(5)(F) of the Act will receive two separate 
payments: (1) 25 percent of the amount they previously would have 
received under section 1886(d)(5)(F) of the Act for DSH (``the 
empirically justified amount''), and (2) an additional payment for the 
DSH hospital's proportion of uncompensated care, determined as the 
product of three factors. These three factors are: (1) 75 percent of 
the payments that would otherwise be made under section 1886(d)(5)(F) 
of the Act; (2) 1 minus the percent change in the percent of 
individuals under the age of 65 who are uninsured (minus 0.1 percentage 
points for FY 2014, and minus 0.2 percentage points for FY 2015 through 
FY 2017); and (3) a hospital's uncompensated care amount relative to 
the uncompensated care amount of all DSH hospitals expressed as a 
percentage.
     Section 1886(m)(6) of the Act, as added by section 
1206(a)(1) of the Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), 
which provided for the establishment of patient criteria for payment 
under the LTCH PPS for implementation beginning in FY 2016.
     Section 1206(b)(1) of the Pathway for SGR Reform Act of 
2013, which further amended section 114(c) of the MMSEA, as amended by 
section 4302(a) of the ARRA and sections 3106(c) and 10312(a) of the 
Affordable Care Act, by retroactively reestablishing and extending the 
statutory moratorium on the full implementation of the 25-percent 
threshold payment adjustment policy under the LTCH PPS so that the 
policy will be in effect for 9 years (except for ``grandfathered'' 
hospital-within-hospitals (HwHs), which are permanently exempt from 
this policy); and section 1206(b)(2) (as amended by section 112(b) of 
Pub. L. 113-93), which together further amended section 114(d)

[[Page 24333]]

of the MMSEA, as amended by section 4302(a) of the ARRA and sections 
3106(c) and 10312(a) of the Affordable Care Act to establish a new 
moratoria (subject to certain defined exceptions) on the development of 
new LTCHs and LTCH satellite facilities and a new moratorium on 
increases in the number of beds in existing LTCHs and LTCH satellite 
facilities beginning January 1, 2015 and ending on September 30, 2017; 
and section 1206(d), which instructs the Secretary to evaluate payments 
to LTCHs classified under section 1886(b)(1)(C)(iv)(II) of the Act and 
to adjust payment rates in FY 2015 or FY 2016 under the LTCH PPS, as 
appropriate, based upon the evaluation findings.
     Section 1886(m)(5)(D)(iv) of the Act, as added by section 
1206 (c) of the Pathway for SGR Reform Act of 2013, which provides for 
the establishment, no later than October 1, 2015, of a functional 
status quality measure under the LTCH QRP for change in mobility among 
inpatients requiring ventilator support.
     Section 1899B of the Act, as added by the Improving 
Medicare Post-Acute Care Transformation Act of 2014 (the IMPACT Act of 
2014), which imposes new data reporting requirements for certain 
postacute care providers, including LTCHs.
2. Summary of the Major Provisions
a. MS-DRG Documentation and Coding Adjustment
    Section 631 of the American Taxpayer Relief Act (ATRA, Pub. L. 112-
240) amended section 7(b)(1)(B) of Public Law 110-90 to require the 
Secretary to make a recoupment adjustment to the standardized amount of 
Medicare payments to acute care hospitals to account for changes in MS-
DRG documentation and coding that do not reflect real changes in case-
mix, totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, 
and 2017. This adjustment represents the amount of the increase in 
aggregate payments as a result of not completing the prospective 
adjustment authorized under section 7(b)(1)(A) of Public Law 110-90 
until FY 2013. Prior to the ATRA, this amount could not have been 
recovered under Public Law 110-90.
    While our actuaries estimated that a -9.3 percent adjustment to the 
standardized amount would be necessary if CMS were to fully recover the 
$11 billion recoupment required by section 631 of the ATRA in one year, 
it is often our practice to delay or phase in rate adjustments over 
more than one year, in order to moderate the effects on rates in any 
one year. Therefore, consistent with the policies that we have adopted 
in many similar cases, we made a -0.8 percent recoupment adjustment to 
the standardized amount in FY 2014 and FY 2015. We are proposing to 
make an additional -0.8 percent recoupment adjustment to the 
standardized amount in FY 2016.
b. Reduction of Hospital Payments for Excess Readmissions
    We are proposing changes in policies to the Hospital Readmissions 
Reduction Program, which is established under section 1886(q) of the 
Act, as added by section 3025 of the Affordable Care Act. The Hospital 
Readmissions Reduction Program requires a reduction to a hospital's 
base operating DRG payment to account for excess readmissions of 
selected applicable conditions. For FYs 2013 and 2014, these conditions 
are acute myocardial infarction, heart failure, and pneumonia. For FY 
2014, we established additional exclusions to the three existing 
readmission measures (that is, the excess readmission ratio) to account 
for additional planned readmissions. We also established additional 
readmissions measures, chronic obstructive pulmonary disease (COPD), 
and total hip arthroplasty and total knee arthroplasty (THA/TKA), to be 
used in the Hospital Readmissions Reduction Program for FY 2015 and 
future years. We expanded the readmissions measures for FY 2017 and 
future years by adding a measure of patients readmitted following 
coronary artery bypass graft (CABG) surgery.
    In this proposed rule, we are proposing a refinement to the 
pneumonia readmissions measure, which would expand the measure cohort 
for the FY 2017 payment determination and subsequent years. In 
addition, we are proposing to adopt an extraordinary circumstance 
exception policy that would align with existing extraordinary 
circumstance exception policies for other IPPS quality reporting and 
payment programs and would allow hospitals that experience an 
extraordinary circumstance (such as a hurricane or flood) to request a 
waiver for use of data from the affected time period.
c. Hospital Value-Based Purchasing (VBP) Program
    Section 1886(o) of the Act requires the Secretary to establish a 
Hospital VBP Program under which value-based incentive payments are 
made in a fiscal year to hospitals based on their performance on 
measures established for a performance period for such fiscal year.
    For FY 2016, we are proposing to adopt one additional measure 
beginning with the FY 2018 program year and one measure beginning with 
the FY 2021 program year. We also are proposing to remove two measures 
beginning with the FY 2018 program year. In addition, we are proposing 
to move one measure to the Safety domain and to remove the Clinical 
Care--Process subdomain and rename the Clinical Care--Outcomes 
subdomain as the Clinical Care domain. Finally, we are signaling our 
intent to propose in future rulemaking to expand one measure and to 
update the standard population data we use to calculate several 
measures beginning with the FY 2019 program year.
d. Hospital-Acquired Condition (HAC) Reduction Program
    Section 1886(p) of the Act, as added under section 3008(a) of the 
Affordable Care Act, establishes an incentive to hospitals to reduce 
the incidence of hospital-acquired conditions by requiring the 
Secretary to make an adjustment to payments to applicable hospitals 
effective for discharges beginning on October 1, 2014 and for 
subsequent program years. This 1-percent payment reduction applies to a 
hospital whose ranking is in the top quartile (25 percent) of all 
applicable hospitals, relative to the national average, of conditions 
acquired during the applicable period and on all of the hospital's 
discharges for the specified fiscal year. The amount of payment shall 
be equal to 99 percent of the amount of payment that would otherwise 
apply to such discharges under section 1886(d) or 1814(b)(3) of the 
Act, as applicable.
    In this proposed rule, we are proposing three changes to existing 
Hospital-Acquired Condition Reduction Program policies: (1) An 
expansion to the population covered by the central line-associated 
bloodstream infection (CLABSI) and catheter-associated urinary tract 
infection (CAUTI) measures to include patients in select nonintensive 
care unit sites within a hospital; (2) an adjustment to the relative 
contribution of each domain to the Total HAC Score which is used to 
determine if a hospital will receive the payment adjustment; and (3) a 
policy that would align with existing extraordinary circumstance 
exception policies for other IPPS quality reporting and payment 
programs and would allow hospitals to request a waiver for use of data 
from the affected time period.

[[Page 24334]]

e. DSH Payment Adjustment and Additional Payment for Uncompensated Care
    Section 3133 of the Affordable Care Act modified the Medicare 
disproportionate share hospital (DSH) payment methodology beginning in 
FY 2014. Under section 1886(r) of the Act, which was added by section 
3133 of the Affordable Care Act, starting in FY 2014, DSHs will receive 
25 percent of the amount they previously would have received under the 
current statutory formula for Medicare DSH payments in section 
1886(d)(5)(F) of the Act. The remaining amount, equal to 75 percent of 
what otherwise would have been paid as Medicare DSH payments, will be 
paid as additional payments after the amount is reduced for changes in 
the percentage of individuals that are uninsured. Each Medicare DSH 
hospital will receive an additional payment based on its share of the 
total amount of uncompensated care for all Medicare DSH hospitals for a 
given time period.
    In this proposed rule, we are proposing to update our estimates of 
the three factors used to determine uncompensated care payments for FY 
2016. We are proposing to continue to use the methodology we 
established in FY 2015 to calculate the uncompensated care payment 
amounts for merged hospitals such that we combine uncompensated care 
data for the hospitals that have undergone a merger in order to 
calculate their relative share of uncompensated care. We also are 
proposing a change to the time period of the data used to calculate the 
uncompensated care payment amounts to be distributed.
f. Proposed Changes to the LTCH PPS
    Under the current LTCH PPS, all discharges are paid under the LTCH 
PPS standard Federal payment rate. In this proposed rule, we are 
proposing to implement section 1206 of the Pathways for SGR Reform Act, 
which requires the establishment of an alternative site neutral payment 
rate for Medicare inpatient discharges from an LTCH that fail to meet 
certain statutory defined criteria, beginning with LTCH discharges 
occurring in cost reporting periods beginning on or after October 1, 
2015. We include proposals regarding the application of the site 
neutral payment rate and the criteria for exclusion from the site 
neutral payment rate, as well as proposals on a number of 
methodological and implementation issues, such as the criterion for a 
principal diagnosis relating to a psychiatric diagnosis or to 
rehabilitation, the intensive care unit (ICU) criterion, the ventilator 
criterion, the definition of ``immediately preceded'' by a subsection 
(d) hospital discharge, limitation on beneficiary charges in the 
context of the new site neutral payment rate, and the transitional 
blended payment rate methodology for FY 2016 and FY 2017.
    In addition, we are proposing changes to address certain statutory 
requirements related to an LTCH's average length of stay criterion and 
discharge payment percentage. We also are providing technical 
clarifications relating to our FY 2015 implementation of the new 
statutory moratoria on the establishment of new LTCHs and LTCH 
satellite facilities (subject to certain defined exceptions) and on bed 
increases in existing LTCHs and LTCH satellite facilities as well as 
proposing a technical revision to the regulations to more clearly 
reflect our established policies.
g. Hospital Inpatient Quality Reporting (IQR) Program
    Under section 1886(b)(3)(B)(viii) of the Act, hospitals are 
required to report data on measures selected by the Secretary for the 
Hospital IQR Program in order to receive the full annual percentage 
increase in payments. In past years, we have established measures for 
reporting data and the process for submittal and validation of the 
data.
    In this proposed rule, we are proposing to update considerations 
for measure removal and retention. In addition, we are proposing to 
remove nine measures for the FY 2018 payment determination and 
subsequent years: Six of these measures are ``topped-out'' and two of 
the measures are suspended. However, we are retaining the electronic 
version of six of these measures. We also are proposing to refine two 
previously adopted measures as well as for the FY 2018 payment 
determination and subsequent years and add eight new measures: Seven 
new claims-based measures and one structural measure.
    Further, for the FY 2018 payment determination, we are proposing to 
require hospitals to report 16 of the 28 electronic clinical quality 
measures under the Hospital IQR Program that align with the Medicare 
EHR Incentive Program and span 3 different NQS domains. We also are 
proposing to require that hospitals submit two quarters (Q3 and Q4) of 
data within 2 months following the last discharge date of the quarter. 
We are proposing to delay and footnote public reporting of electronic 
clinical quality measure data submitted by hospitals for the CY 2016/FY 
2018 payment determination.
    We are proposing to align the reporting and submission timelines 
for the electronic submission of clinical quality measures for the 
Medicare EHR Incentive Program for eligible hospitals and critical 
access hospitals (CAHs) with the reporting and submission timelines for 
the Hospital IQR Program. Lastly, ONC is proposing a 2015 Edition 
certification criterion for ``CQMs--report'' as part of the proposed 
2015 Edition of certification criteria that would require a certified 
Health IT Module to enable a user to electronically create a data file 
for transmission of clinical quality measurement data. This proposed 
certification criterion would apply to eligible professionals, eligible 
hospitals, and CAHs.
h. Long-Term Care Quality Reporting Program (LTCH QRP)
    Section 3004(a) of the Affordable Care Act amended section 
1886(m)(5) of the Act to require the Secretary to establish the Long-
Term Care Hospital Quality Reporting Program (LTCH QRP). This program 
applies to all hospitals certified by Medicare as LTCHs. Beginning with 
the FY 2014 payment determination and subsequent years, the Secretary 
is required to reduce any annual update to the standard Federal rate 
for discharges occurring during such fiscal year by 2 percentage points 
for any LTCH that does not comply with the requirements established by 
the Secretary.
    The IMPACT Act of 2014 amended the Act in ways that affect the LTCH 
QRP. Specifically, section 2(a) of the IMPACT Act of 2014 added section 
1899B of the Act, and section 2(c)(3) of the IMPACT Act of 2014 amended 
section 1886(m)(5) of the Act. Under section 1899B(a)(1) of the Act, 
the Secretary must require post-acute care (PAC) providers (defined in 
section 1899B(a)(2)(A) of the Act to include HHAs, SNFs, IRFs, and 
LTCHs) to submit standardized patient assessment data in accordance 
with section 1899B(b) of the Act, data on quality measures required 
under section 1899B(c)(1) of the Act, and data on resource use and 
other measures required under section 1899B(d)(1) of the Act. The Act 
also sets out specified application dates for each of the measures. The 
Secretary must specify the quality, resource use, and other measures 
not later than the applicable specified application date defined in 
section 1899B(a)(2)(E) of the Act.
    In this proposed rule, we are proposing three previously finalized 
quality measures: One measure proposal establishes the newly NQF-
endorsed status of that quality measure; two other

[[Page 24335]]

measure proposals are for the purpose of establishing the cross-setting 
use of the previously finalized quality measures, in order to satisfy 
the IMPACT Act of 2014 requirement of adopting quality measures under 
the domains of skin integrity and falls with major injury. We are 
proposing to adopt an ``application of'' a fourth previously finalized 
LTCH functional status measure in order to meet the requirement of the 
IMPACT Act of 2014 to adopt a cross-setting measure under the domain of 
functional status, such as self-care or mobility. All four measure 
proposals effect the FY 2018 annual payment update determination and 
beyond.
    In addition, we are proposing to publicly report LTCH quality data 
beginning in fall 2016, on a CMS Web site, such as Hospital Compare. We 
are proposing to initially publicly report quality data on four quality 
measures.
    Finally, we are proposing to lengthen our quarterly data submission 
deadlines from 45 days to 135 days beyond the end of each calendar year 
quarter beginning with quarter four (4) 2015 quality data. We are 
proposing this change in order to align with other quality reporting 
programs, and to allow an appropriate amount of time for LTCHs to 
review and correct quality data prior to the public posting of that 
data.
3. Summary of Costs and Benefits
     Adjustment for MS-DRG Documentation and Coding Changes. We 
are proposing to make a -0.8 percent recoupment adjustment to the 
standardized amount for FY 2016 to implement, in part, the requirement 
of section 631 of the ATRA that the Secretary make an adjustment 
totaling $11 billion over a 4-year period of FYs 2014, 2015, 2016, and 
2017. This proposed recoupment adjustment represents the amount of the 
increase in aggregate payments as a result of not completing the 
prospective adjustment authorized under section 7(b)(1)(A) of Public 
Law 110-90 until FY 2013. Prior to the ATRA, this amount could not have 
been recovered under Public Law 110-90.
    While our actuaries estimated that a -9.3 percent recoupment 
adjustment to the standardized amount would be necessary if CMS were to 
fully recover the $11 billion recoupment required by section 631 of the 
ATRA in FY 2014, it is often our practice to delay or phase in rate 
adjustments over more than one year, in order to moderate the effects 
on rates in any one year. Therefore, consistent with the policies that 
we have adopted in many similar cases and the adjustment we made for FY 
2014, we are proposing to make a -0.8 percent recoupment adjustment to 
the standardized amount in FY 2016. Considering the -0.8 percent 
adjustments made in FY 2014 and FY 2015, we estimate that the combined 
impact of the proposed adjustment for FY 2016 and leaving the FY 2014 
and FY 2015 adjustments in place would be to recover up to $3 billion 
in FY 2016. Combined with the effects of the -0.8 percent adjustments 
implemented in FY 2014 and FY 2015, we estimate that the proposed FY 
2016 -0.8 percent adjustment would result in the recovery of a total of 
approximately $6 billion of the $11 billion in overpayments required to 
be recovered by section 631 of the ATRA.
     Proposed Changes to the Hospital Readmissions Reduction 
Program. We are proposing a refinement to the pneumonia readmissions 
measure, which would expand the measure cohort for the FY 2017 payment 
determination and subsequent years. In addition, we are proposing to 
adopt an extraordinary circumstance exception policy that would align 
with existing extraordinary circumstance exception policies for other 
IPPS quality reporting and payment programs and would allow hospitals 
that experience an extraordinary circumstance (such as a hurricane or 
flood) to request a waiver for use of data from the affected time 
period. These proposed changes would not significantly impact the 
program in FY 2016, but could impact future years, depending on actual 
experience.
     Value-Based Incentive Payments under the Hospital VBP 
Program. We estimate that there would be no net financial impact to the 
Hospital VBP Program for the FY 2016 program year in the aggregate 
because, by law, the amount available for value-based incentive 
payments under the program in a given year must be equal to the total 
amount of base operating MS-DRG payment amount reductions for that 
year, as estimated by the Secretary. The estimated amount of base 
operating MS-DRG payment amount reductions for the FY 2016 program year 
and, therefore, the estimated amount available for value-based 
incentive payments for FY 2016 discharges is approximately $1.5 
billion. We believe that the program benefits will be seen in improved 
patient outcomes, safety, and in the patient's experience of care. 
However, we cannot estimate these benefits in actual dollar and patient 
terms.
     Proposed Changes to the HAC Reduction Program for FY 2016. 
We are proposing three changes to existing HAC Reduction Program 
policies: (1) An expansion to the population covered by the central 
line-associated bloodstream infection (CLABSI) and catheter-associated 
urinary tract infection (CAUTI) measures to include patients in select 
nonintensive care unit sites within a hospital; (2) an adjustment to 
the relative contribution of each domain to the Total HAC Score that is 
used to determine if a hospital will receive the payment adjustment; 
and (3) a policy that would align with existing extraordinary 
circumstance exception policies for other IPPS quality reporting and 
payment programs and would allow hospitals to request a waiver for use 
of data from the affected period. While hospitals in the top quartile 
of HAC scores will continue to have their HAC Reduction Program payment 
adjustment applied, as required by law, because a hospital's Total HAC 
score and its ranking in comparison to other hospitals in any given 
year depend on several different factors, any significant impact due to 
the proposed changes, including which hospitals receive the adjustment, 
would depend on actual experience.
     Medicare DSH Payment Adjustment and Additional Payment for 
Uncompensated Care. Under section 1886(r) of the Act (as added by 
section 3313 of the Affordable Care Act), disproportionate share 
hospital payments to hospitals under section 1886(d)(5)(F) of the Act 
are reduced and an additional payment for uncompensated care is made to 
eligible hospitals beginning in FY 2014. Hospitals that receive 
Medicare DSH payments will receive 25 percent of the amount they 
previously would have received under the current statutory formula for 
Medicare DSH payments in section 1886(d)(5)(F) of the Act. The 
remainder, equal to an estimate of 75 percent of what otherwise would 
have been paid as Medicare DSH payments, will be the basis for 
determining the additional payments for uncompensated care after the 
amount is reduced for changes in the percentage of individuals that are 
uninsured and additional statutory adjustments. Each hospital that 
receives Medicare DSH payments will receive an additional payment for 
uncompensated care based on its share of the total uncompensated care 
amount reported by Medicare DSHs. The reduction to Medicare DSH 
payments is not budget neutral.
    For FY 2016, we are proposing to provide that the 75 percent of 
what otherwise would have been paid for Medicare DSH is adjusted to 
approximately 63.69 percent of the amount to reflect changes in the 
percentage of individuals that are uninsured and additional statutory 
adjustments. In other words,

[[Page 24336]]

approximately 47.76 percent (the product of 75 percent and 63.69 
percent) of our estimate of Medicare DSH payments prior to the 
application of section 3133 of the Affordable Care Act is available to 
make additional payment to hospitals for their relative share of the 
total amount of uncompensated care. We project that Medicare DSH 
payments and additional payments for uncompensated care made for FY 
2016 would reduce payments overall by approximately 1 percent as 
compared to the Medicare DSH payments and uncompensated care payments 
distributed in FY 2015. The additional payments have redistributive 
effects based on a hospital's uncompensated care amount relative to the 
uncompensated care amount for all hospitals that are estimated to 
receive Medicare DSH payments, and the proposed payment amount is not 
directly tied to a hospital's number of discharges.
     Proposed Update to the LTCH PPS Payment Rates and Other 
Payment Factors. Based on the best available data for the 418 LTCHs in 
our data base, we estimate that the proposed changes to the payment 
rates and factors that we are presenting in the preamble and Addendum 
of this proposed rule, including the proposed application of the new 
site neutral payment rate required by section 1886(m)(6)(A) of the Act, 
the proposed update to the LTCH PPS standard Federal rate for FY 2016, 
and the proposed changes to short-stay outlier and high-cost outlier 
payments would result in an estimated decrease in payments from FY 2015 
of approximately $251 million (or 4.6 percent).
     Hospital Inpatient Quality Reporting (IQR) Program. In 
this proposed rule, we are proposing to remove nine measures for the FY 
2018 payment determination and subsequent years. We are proposing to 
add eight measures to the hospital IQR Program for the FY 2018 payment 
determination and subsequent years. We also are proposing to require 
hospitals to report 16 of the 28 Hospital IQR Program electronic 
clinical quality measures that align with the Medicare EHR Incentive 
Program and span three different NQS domains. We estimate that our 
proposals for the adoption and removal of measures will result in total 
hospital costs of $169 million across 3,300 IPPS hospitals.
     Changes in LTCH Payments Related to the LTCH QRP 
Proposals. We believe that the increase in costs to LTCHs related to 
our LTCH QRP proposals in this proposed rule is zero. We refer readers 
to sections VIII.C. of the preamble of this proposed rule for detailed 
discussion of the proposals.

B. Summary

1. Acute Care Hospital Inpatient Prospective Payment System (IPPS)
    Section 1886(d) of the Social Security Act (the Act) sets forth a 
system of payment for the operating costs of acute care hospital 
inpatient stays under Medicare Part A (Hospital Insurance) based on 
prospectively set rates. Section 1886(g) of the Act requires the 
Secretary to use a prospective payment system (PPS) to pay for the 
capital-related costs of inpatient hospital services for these 
``subsection (d) hospitals.'' Under these PPSs, Medicare payment for 
hospital inpatient operating and capital-related costs is made at 
predetermined, specific rates for each hospital discharge. Discharges 
are classified according to a list of diagnosis-related groups (DRGs).
    The base payment rate is comprised of a standardized amount that is 
divided into a labor-related share and a nonlabor-related share. The 
labor-related share is adjusted by the wage index applicable to the 
area where the hospital is located. If the hospital is located in 
Alaska or Hawaii, the nonlabor-related share is adjusted by a cost-of-
living adjustment factor. This base payment rate is multiplied by the 
DRG relative weight.
    If the hospital treats a high percentage of certain low-income 
patients, it receives a percentage add-on payment applied to the DRG-
adjusted base payment rate. This add-on payment, known as the 
disproportionate share hospital (DSH) adjustment, provides for a 
percentage increase in Medicare payments to hospitals that qualify 
under either of two statutory formulas designed to identify hospitals 
that serve a disproportionate share of low-income patients. For 
qualifying hospitals, the amount of this adjustment varies based on the 
outcome of the statutory calculations. The Affordable Care Act revised 
the Medicare DSH payment methodology and provides for a new additional 
Medicare payment that considers the amount of uncompensated care 
beginning on October 1, 2013.
    If the hospital is an approved teaching hospital, it receives a 
percentage add-on payment for each case paid under the IPPS, known as 
the indirect medical education (IME) adjustment. This percentage 
varies, depending on the ratio of residents to beds.
    Additional payments may be made for cases that involve new 
technologies or medical services that have been approved for special 
add-on payments. To qualify, a new technology or medical service must 
demonstrate that it is a substantial clinical improvement over 
technologies or services otherwise available, and that, absent an add-
on payment, it would be inadequately paid under the regular DRG 
payment.
    The costs incurred by the hospital for a case are evaluated to 
determine whether the hospital is eligible for an additional payment as 
an outlier case. This additional payment is designed to protect the 
hospital from large financial losses due to unusually expensive cases. 
Any eligible outlier payment is added to the DRG-adjusted base payment 
rate, plus any DSH, IME, and new technology or medical service add-on 
adjustments.
    Although payments to most hospitals under the IPPS are made on the 
basis of the standardized amounts, some categories of hospitals are 
paid in whole or in part based on their hospital-specific rate, which 
is determined from their costs in a base year. For example, sole 
community hospitals (SCHs) receive the higher of a hospital-specific 
rate based on their costs in a base year (the highest of FY 1982, FY 
1987, FY 1996, or FY 2006) or the IPPS Federal rate based on the 
standardized amount. (We note that the statutory provision for Medicare 
payments to MDHs expired on March 31, 2015, under current law.) SCHs 
are the sole source of care in their areas. Specifically, section 
1886(d)(5)(D)(iii) of the Act defines an SCH as a hospital that is 
located more than 35 road miles from another hospital or that, by 
reason of factors such as isolated location, weather conditions, travel 
conditions, or absence of other like hospitals (as determined by the 
Secretary), is the sole source of hospital inpatient services 
reasonably available to Medicare beneficiaries. In addition, certain 
rural hospitals previously designated by the Secretary as essential 
access community hospitals are considered SCHs.
    Section 1886(g) of the Act requires the Secretary to pay for the 
capital-related costs of inpatient hospital services ``in accordance 
with a prospective payment system established by the Secretary.'' The 
basic methodology for determining capital prospective payments is set 
forth in our regulations at 42 CFR 412.308 and 412.312. Under the 
capital IPPS, payments are adjusted by the same DRG for the case as 
they are under the operating IPPS. Capital IPPS payments are also 
adjusted for IME and DSH, similar to the adjustments made under the 
operating IPPS. In addition, hospitals may receive outlier payments for 
those cases that have unusually high costs.
    The existing regulations governing payments to hospitals under the 
IPPS

[[Page 24337]]

are located in 42 CFR part 412, subparts A through M.
2. Hospitals and Hospital Units Excluded From the IPPS
    Under section 1886(d)(1)(B) of the Act, as amended, certain 
hospitals and hospital units are excluded from the IPPS. These 
hospitals and units are: Rehabilitation hospitals and units; long-term 
care hospitals (LTCHs); psychiatric hospitals and units; children's 
hospitals; certain cancer hospitals; and short-term acute care 
hospitals located in Guam, the U.S. Virgin Islands, the Northern 
Mariana Islands, and American Samoa. Religious nonmedical health care 
institutions (RNHCIs) are also excluded from the IPPS. Various sections 
of the Balanced Budget Act of 1997 (BBA, Pub. L. 105-33), the Medicare, 
Medicaid and SCHIP [State Children's Health Insurance Program] Balanced 
Budget Refinement Act of 1999 (BBRA, Pub. L. 106-113), and the 
Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act 
of 2000 (BIPA, Pub. L. 106-554) provide for the implementation of PPSs 
for rehabilitation hospitals and units (referred to as inpatient 
rehabilitation facilities (IRFs)), LTCHs, and psychiatric hospitals and 
units (referred to as inpatient psychiatric facilities (IPFs)). (We 
note that the annual updates to the LTCH PPS are now included as part 
of the IPPS annual update document. Updates to the IRF PPS and IPF PPS 
are issued as separate documents.) Children's hospitals, certain cancer 
hospitals, short-term acute care hospitals located in Guam, the U.S. 
Virgin Islands, the Northern Mariana Islands, and American Samoa, and 
RNHCIs continue to be paid solely under a reasonable cost-based system 
subject to a rate-of-increase ceiling on inpatient operating costs, as 
updated annually by the percentage increase in the IPPS operating 
market basket.
    The existing regulations governing payments to excluded hospitals 
and hospital units are located in 42 CFR parts 412 and 413.
3. Long-Term Care Hospital Prospective Payment System (LTCH PPS)
    The Medicare prospective payment system (PPS) for LTCHs applies to 
hospitals described in section 1886(d)(1)(B)(iv) of the Act effective 
for cost reporting periods beginning on or after October 1, 2002. The 
LTCH PPS was established under the authority of section 123 of the BBRA 
and section 307(b) of the BIPA (as codified under section 1886(m)(1) of 
the Act). During the 5-year (optional) transition period, a LTCH's 
payment under the PPS was based on an increasing proportion of the LTCH 
Federal rate with a corresponding decreasing proportion based on 
reasonable cost principles. Effective for cost reporting periods 
beginning on or after October 1, 2006, all LTCHs are paid 100 percent 
of the Federal rate. Section 1206(a) of Public Law 113-67 established 
the site neutral payment rate under the LTCH PPS. Under this statute, 
based on a rolling effective date that is linked to the date on which a 
given LTCH's Federal FY 2016 cost reporting period begins, LTCHs will 
be paid for LTCH discharges at the new site neutral payment rate unless 
the discharge meets the patient criteria for payment at the LTCH PPS 
standard Federal rate. The existing regulations governing payment under 
the LTCH PPS are located in 42 CFR part 412, subpart O. Beginning with 
FY 2009, annual updates to the LTCH PPS are published in the same 
documents that update the IPPS (73 FR 26797 through 26798).
4. Critical Access Hospitals (CAHs)
    Under sections 1814(l), 1820, and 1834(g) of the Act, payments made 
to critical access hospitals (CAHs) (that is, rural hospitals or 
facilities that meet certain statutory requirements) for inpatient and 
outpatient services are generally based on 101 percent of reasonable 
cost. Reasonable cost is determined under the provisions of section 
1861(v)(1)(A) of the Act and existing regulations under 42 CFR part 
413.
5. Payments for Graduate Medical Education (GME)
    Under section 1886(a)(4) of the Act, costs of approved educational 
activities are excluded from the operating costs of inpatient hospital 
services. Hospitals with approved graduate medical education (GME) 
programs are paid for the direct costs of GME in accordance with 
section 1886(h) of the Act. The amount of payment for direct GME costs 
for a cost reporting period is based on the hospital's number of 
residents in that period and the hospital's costs per resident in a 
base year. The existing regulations governing payments to the various 
types of hospitals are located in 42 CFR part 413.

C. Summary of Provisions of Recent Legislation Discussed in This 
Proposed Rule

    The American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240), 
enacted on January 2, 2013, made a number of changes that affect the 
IPPS. We announced changes related to certain IPPS provisions for FY 
2013 in accordance with sections 605 and 606 of Public Law 112-240 in a 
notice that appeared in the Federal Register on March 7, 2013 (78 FR 
14689).
    The Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 
(Pub. L. 113-67), enacted on December 26, 2013, also made a number of 
changes that affect the IPPS and the LTCH PPS. We implemented changes 
related to the low-volume hospital payment adjustment and MDH 
provisions for FY 2014 in accordance with sections 1105 and 1106 of 
Public Law 113-67 in an interim final rule with comment period that 
appeared in the Federal Register on March 18, 2014 (79 FR 15022).
    The Protecting Access to Medicare Act of 2014 (Pub. L. 113-93), 
enacted on April 1, 2014, also made a number of changes that affect the 
IPPS and LTCH PPS.
    The Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act of 2014) (Pub. L. 113-185), enacted on October 6, 2014, 
made a number of changes that affect the Long-Term Care Quality 
Reporting Program (LTCH QRP).
1. American Taxpayer Relief Act of 2012 (ATRA) (Pub. L. 112-240)
    In this proposed rule, we are proposing to make policy changes to 
implement section 631 of the American Taxpayer Relief Act of 2012, 
which amended section 7(b)(1)(B) of Public Law 110-90 and requires a 
recoupment adjustment to the standardized amounts under section 1886(d) 
of the Act based upon the Secretary's estimates for discharges 
occurring in FY 2014 through FY 2017 to fully offset $11 billion (which 
represents the amount of the increase in aggregate payments from FYs 
2008 through 2013 for which an adjustment was not previously applied).
2. Pathway for Sustainable Growth Rate (SGR) Reform Act of 2013 (Pub. 
L. 113-67)
    In this proposed rule, we are proposing to make policy changes to 
implement and discuss the need for future policy changes to carry out 
provisions under section 1206 of the Pathway for SGR Reform Act of 
2013. These include:
     Section 1206(a), which provides for the establishment of 
patient criteria for exclusion from the new ``site neutral'' payment 
rate under the LTCH PPS, beginning in FY 2016.
     Section 1206(a)(3), which requires changes to the LTCH 
average length of stay criterion.
     Section 1206(b)(1), which further amended section 114(c) 
of the MMSEA, as amended by section 4302(a) of the ARRA and sections 
3106(c) and

[[Page 24338]]

10312(a) of the Affordable Care Act by retroactively reestablishing, 
and extending, the statutory moratorium on the full implementation of 
the 25-percent threshold payment adjustment policy under the LTCH PPS 
so that the policy will be in effect for 9 years (except for 
grandfathered hospitals-within-hospitals (HwHs), which it permanently 
exempted from this policy).
     Section 1206(b)(2), which amended section 114(d) of the 
MMSEA, as amended by section 4302(a) of the ARRA and sections 3106(c) 
and 10312(a) of the Affordable Care Act to establish new moratoria 
(subject to certain defined exceptions) on the development of new LTCHs 
and LTCH satellite facilities and a new moratorium on increases in the 
number of beds in existing LTCHs and LTCH satellite facilities.
3. Protecting Access to Medicare Act of 2014 (Pub. L. 113-93)
    In this proposed rule, we are proposing to make policy changes to 
implement, or making conforming changes to regulations in accordance 
with, the following provisions (or portions of the following 
provisions) of the Protecting Access to Medicare Act of 2014 that are 
applicable to the IPPS and the LTCH PPS for FY 2016:
     Section 112, which makes certain changes to Medicare LTCH 
provisions, including modifications to the statutory moratoria on the 
establishment of new LTCHs and LTCH satellite facilities.
     Section 212, which prohibits the Secretary from requiring 
implementation of ICD-10 code sets before October 1, 2015.
4. Improving Medicare Post-Acute Care Transformation Act of 2014 
(IMPACT Act of 2014) (Pub. L. 113-185)
    In this proposed rule, we are proposing to implement portions of 
section 2 of the IMPACT Act of 2014, which, in part, requires LTCHs, 
among other postacute care providers, to report standardized patient 
assessment data, data on quality measures, and data on resource use and 
other measures.

D. Summary of the Major Provisions of This Proposed Rule

    In this proposed rule, we set forth proposed changes to the 
Medicare IPPS for operating costs and for capital-related costs of 
acute care hospitals for FY 2016. We also set forth proposed changes 
relating to payments to certain hospitals that continue to be excluded 
from the IPPS and paid on a reasonable cost basis. In addition, in this 
proposed rule, we set forth proposed changes to the payment rates, 
factors, and other payment rate policies under the LTCH PPS for FY 
2016.
    Below is a summary of the major changes that we are proposing to 
make:
1. Proposed Changes to MS-DRG Classifications and Recalibrations of 
Relative Weights
    In section II. of the preamble of this proposed rule, we include--
     Proposed changes to MS-DRG classifications based on our 
yearly review, including a discussion of the conversion of MS-DRGs to 
ICD-10 and the implementation of the ICD-10-CM and ICD-10-PCS systems.
     Proposed application of the documentation and coding 
adjustment for FY 2016 resulting from implementation of the MS-DRG 
system.
     Proposed recalibrations of the MS-DRG relative weights.
     Proposed changes to hospital-acquired conditions (HACs) 
and a discussion of HACs, including infections, that would be subject 
to the statutorily required adjustment in MS-DRG payments for FY 2016.
     A discussion of the FY 2016 status of new technologies 
approved for add-on payments for FY 2015 and a presentation of our 
evaluation and analysis of the FY 2016 applicants for add-on payments 
for high-cost new medical services and technologies (including public 
input, as directed by Pub. L. 108-173, obtained in a town hall 
meeting).
2. Proposed Changes to the Hospital Wage Index for Acute Care Hospitals
    In section III. of the preamble to this proposed rule, we are 
proposing revisions to the wage index for acute care hospitals and the 
annual update of the wage data. Specific issues addressed included the 
following:
     The proposed FY 2016 wage index update using wage data 
from cost reporting periods beginning in FY 2012.
     Calculation of the proposed occupational mix adjustment 
for FY 2016 based on the 2013 Occupational Mix Survey.
     Analysis and implementation of the proposed FY 2016 
occupational mix adjustment to the wage index for acute care hospitals.
     Proposed application of the rural floor, the proposed 
imputed rural floor, and the proposed frontier State floor.
     Transitional wage indexes relating to the continued use of 
the revised OMB labor market area delineations based on 2010 Decennial 
Census data.
     Proposed revisions to the wage index for acute care 
hospitals based on hospital redesignations and reclassifications.
     The proposed out-migration adjustment to the wage index 
for acute care hospitals for FY 2016 based on commuting patterns of 
hospital employees who reside in a county and work in a different area 
with a higher wage index. Beginning in FY 2016, we are proposing new 
out-migration adjustments based on commuting patterns obtained from 
2010 Decennial Census data.
     The timetable for reviewing and verifying the wage data 
used to compute the proposed FY 2016 hospital wage index.
     Determination of the labor-related share for the proposed 
FY 2016 wage index.
     Proposed changes to the 3-year average pension policy and 
proposed changes to the wage index timetable regarding pension cost for 
FY 2017 and subsequent years.
     Clarification of the allocation of pension costs for the 
wage index.
3. Other Decisions and Proposed Changes to the IPPS for Operating Costs 
and Indirect Medical Education (IME) Costs
    In section IV. of the preamble of this proposed rule, we discuss 
proposed changes or clarifications of a number of the provisions of the 
regulations in 42 CFR parts 412 and 413, including the following:
     Proposed changes to the inpatient hospital updates for FY 
2016, including the adjustment for hospitals that are not meaningful 
EHR users under section 1886(b)(3)(B)(ix) of the Act.
     The proposed updated national and regional case-mix values 
and discharges for purposes of determining RRC status.
     The statutorily required IME adjustment factor for FY 
2016.
     Proposal for determining Medicare DSH payments and the 
additional payments for uncompensated care for FY 2016.
     Proposed changes to the measures and payment adjustments 
under the Hospital Readmissions Reduction Program.
     Proposed changes to the requirements and provision of 
value-based incentive payments under the Hospital Value-Based 
Purchasing Program.
     Proposed requirements for payment adjustments to hospitals 
under the HAC Reduction Program for FY 2016.
     Proposed elimination of the election by hospitals to use 
the simplified cost allocation methodology for Medicare cost reports.
     Discussion of the Rural Community Hospital Demonstration 
Program and a proposal for making a budget neutrality

[[Page 24339]]

adjustment for the demonstration program.
     Proposed changes in postacute care transfer policies as a 
result of proposed new MS-DRGs.
     A statement of our intent to discuss issues related to 
short inpatient hospital stays, long outpatient stays with observation 
services, and the related -0.2 percent IPPS payment adjustment in the 
CY 2016 hospital outpatient prospective payment system proposed rule 
that will be published this summer.
4. Proposed FY 2016 Policy Governing the IPPS for Capital-Related Costs
    In section V. of the preamble to this proposed rule, we discuss the 
proposed payment policy requirements for capital-related costs and 
capital payments to hospitals for FY 2016.
5. Proposed Changes to the Payment Rates for Certain Excluded 
Hospitals: Rate-of-Increase Percentages
    In section VI. of the preamble of this proposed rule, we discuss 
proposed changes to payments to certain excluded hospitals for FY 2016.
6. Proposed Changes to the LTCH PPS
    In section VII. of the preamble of this proposed rule, we set 
forth--
     Proposed changes to the LTCH PPS Federal payment rates, 
factors, and other payment rate policies under the LTCH PPS for FY 
2016.
     Proposals to implement section 1206(a)(1) of the Pathway 
for SGR Reform Act, which established the site neutral payment rate as 
the default means of paying for discharges in LTCH cost reporting 
periods beginning on or after October 1, 2015.
     Provisions to make technical clarifications regarding the 
moratoria on the establishment of new LTCHs and LTCH satellite 
facilities and on bed increases in existing LTCHs and LTCH satellite 
facilities that were established by section 1206(b)(2) of the Pathway 
for SGR Reform, as amended, as well as a proposal to make a technical 
revision to the regulations to more clearly reflect our established 
policies.
     Proposal to revise the average length of stay criterion 
for LTCHs to implement section 1206(a)(3) of the Pathway for SGR Reform 
Act.
7. Proposed Changes Relating to Quality Data Reporting for Specific 
Providers and Suppliers
    In section VIII. of the preamble of this proposed rule, we 
address--
     Proposed requirements for the Hospital Inpatient Quality 
Reporting (IQR) Program as a condition for receiving the full 
applicable percentage increase.
     Proposed changes to the requirements for the quality 
reporting program for PPS-exempt cancer hospitals (PCHQR Program).
     Proposed changes to the requirements under the LTCH 
Quality Reporting Program (LTCH QRP).
     Proposed changes to align the reporting and submission 
timelines for the electronic submission of clinical quality measures 
for the Medicare Electronic Health Record (EHR) Incentive Program for 
eligible hospitals and CAHs with the reporting and submission of 
timelines for the Hospital IQR Program, including a proposal to 
establish in regulations an EHR technology certification criterion for 
reporting clinical quality measures.
8. Determining Prospective Payment Operating and Capital Rates and 
Rate-of-Increase Limits for Acute Care Hospitals
    In the Addendum to this proposed rule, we set forth proposed 
changes to the amounts and factors for determining the proposed FY 2016 
prospective payment rates for operating costs and capital-related costs 
for acute care hospitals. We also are proposing to establish the 
threshold amounts for outlier cases. In addition, we address the update 
factors for determining the rate-of-increase limits for cost reporting 
periods beginning in FY 2016 for certain hospitals excluded from the 
IPPS.
9. Determining Standard Federal Payment Rates for LTCHs
    In the Addendum to this proposed rule, we set forth proposed 
changes to the amounts and factors for determining the proposed FY 2016 
LTCH PPS standard Federal payment rate. We are proposing to establish 
the adjustments for wage levels, the labor-related share, the cost-of-
living adjustment, and high-cost outliers, including the fixed-loss 
amount, and the LTCH cost-to-charge ratios (CCRs) under the LTCH PPS.
10. Impact Analysis
    In Appendix A of this proposed rule, we set forth an analysis of 
the impact that the proposed changes would have on affected acute care 
hospitals, LTCHs, and PCHs.
11. Recommendation of Update Factors for Operating Cost Rates of 
Payment for Hospital Inpatient Services
    In Appendix B of this proposed rule, as required by sections 
1886(e)(4) and (e)(5) of the Act, we provide our recommendations of the 
appropriate percentage changes for FY 2016 for the following:
     A single average standardized amount for all areas for 
hospital inpatient services paid under the IPPS for operating costs of 
acute care hospitals (and hospital-specific rates applicable to SCHs).
     Target rate-of-increase limits to the allowable operating 
costs of hospital inpatient services furnished by certain hospitals 
excluded from the IPPS.
     The standard Federal payment rate for hospital inpatient 
services furnished by LTCHs.
12. Discussion of Medicare Payment Advisory Commission Recommendations
    Under section 1805(b) of the Act, MedPAC is required to submit a 
report to Congress, no later than March 15 of each year, in which 
MedPAC reviews and makes recommendations on Medicare payment policies. 
MedPAC's March 2015 recommendations concerning hospital inpatient 
payment policies address the update factor for hospital inpatient 
operating costs and capital-related costs for hospitals under the IPPS. 
We address these recommendations in Appendix B of the proposed rule. 
For further information relating specifically to the MedPAC March 2015 
report or to obtain a copy of the report, contact MedPAC at (202) 220-
3700 or visit MedPAC's Web site at: http://www.medpac.gov.

II. Proposed Changes to Medicare Severity Diagnosis-Related Group (MS-
DRG) Classifications and Relative Weights

A. Background

    Section 1886(d) of the Act specifies that the Secretary shall 
establish a classification system (referred to as diagnosis-related 
groups (DRGs)) for inpatient discharges and adjust payments under the 
IPPS based on appropriate weighting factors assigned to each DRG. 
Therefore, under the IPPS, Medicare pays for inpatient hospital 
services on a rate per discharge basis that varies according to the DRG 
to which a beneficiary's stay is assigned. The formula used to 
calculate payment for a specific case multiplies an individual 
hospital's payment rate per case by the weight of the DRG to which the 
case is assigned. Each DRG weight represents the average resources 
required to care for cases in that particular DRG, relative to the 
average resources used to treat cases in all DRGs.
    Congress recognized that it would be necessary to recalculate the 
DRG relative weights periodically to account for changes in resource 
consumption. Accordingly, section 1886(d)(4)(C) of the Act requires 
that the Secretary

[[Page 24340]]

adjust the DRG classifications and relative weights at least annually. 
These adjustments are made to reflect changes in treatment patterns, 
technology, and any other factors that may change the relative use of 
hospital resources.

B. MS-DRG Reclassifications

    For general information about the MS-DRG system, including yearly 
reviews and changes to the MS-DRGs, we refer readers to the previous 
discussions in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 
43764 through 43766), the FY 2011 IPPS/LTCH PPS final rule (75 FR 50053 
through 50055), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51485 
through 51487), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53273), the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50512), and the FY 2015 IPPS/
LTCH PPS final rule (79 FR 49871).

C. Adoption of the MS-DRGs in FY 2008

    For information on the adoption of the MS-DRGs in FY 2008, we refer 
readers to the FY 2008 IPPS final rule with comment period (72 FR 47140 
through 47189).

D. Proposed FY 2016 MS-DRG Documentation and Coding Adjustment

1. Background on the Prospective MS-DRG Documentation and Coding 
Adjustments for FY 2008 and FY 2009 Authorized by Public Law 110-90
    In the FY 2008 IPPS final rule with comment period (72 FR 47140 
through 47189), we adopted the MS-DRG patient classification system for 
the IPPS, effective October 1, 2007, to better recognize severity of 
illness in Medicare payment rates for acute care hospitals. The 
adoption of the MS-DRG system resulted in the expansion of the number 
of DRGs from 538 in FY 2007 to 745 in FY 2008. (Currently, for FY 2015, 
there are 775 MS-DRGs.) By increasing the number of MS-DRGs and more 
fully taking into account patient severity of illness in Medicare 
payment rates for acute care hospitals, MS-DRGs encourage hospitals to 
improve their documentation and coding of patient diagnoses.
    In the FY 2008 IPPS final rule with comment period (72 FR 47175 
through 47186), we indicated that the adoption of the MS-DRGs had the 
potential to lead to increases in aggregate payments without a 
corresponding increase in actual patient severity of illness due to the 
incentives for additional documentation and coding. In that final rule 
with comment period, we exercised our authority under section 
1886(d)(3)(A)(vi) of the Act, which authorizes us to maintain budget 
neutrality by adjusting the national standardized amount, to eliminate 
the estimated effect of changes in coding or classification that do not 
reflect real changes in case-mix. Our actuaries estimated that 
maintaining budget neutrality required an adjustment of -4.8 percent to 
the national standardized amount. We provided for phasing in this -4.8 
percent adjustment over 3 years. Specifically, we established 
prospective documentation and coding adjustments of -1.2 percent for FY 
2008, -1.8 percent for FY 2009, and -1.8 percent for FY 2010.
    On September 29, 2007, Congress enacted the TMA [Transitional 
Medical Assistance], Abstinence Education, and QI [Qualifying 
Individuals] Programs Extension Act of 2007 (Pub. L. 110-90). Section 
7(a) of Public Law 110-90 reduced the documentation and coding 
adjustment made as a result of the MS-DRG system that we adopted in the 
FY 2008 IPPS final rule with comment period to -0.6 percent for FY 2008 
and -0.9 percent for FY 2009, and we finalized the FY 2008 adjustment 
through rulemaking, effective October 1, 2007 (72 FR 66886).
    For FY 2009, section 7(a) of Public Law 110-90 required a 
documentation and coding adjustment of -0.9 percent, and we finalized 
that adjustment through rulemaking effective October 1, 2008 (73 FR 
48447). The documentation and coding adjustments established in the FY 
2008 IPPS final rule with comment period, which reflected the 
amendments made by section 7(a) of Public Law 110-90, are cumulative. 
As a result, the -0.9 percent documentation and coding adjustment for 
FY 2009 was in addition to the -0.6 percent adjustment for FY 2008, 
yielding a combined effect of -1.5 percent.
2. Adjustment to the Average Standardized Amounts Required by Public 
Law 110-90
a. Prospective Adjustment Required by Section 7(b)(1)(A) of Public Law 
110-90
    Section 7(b)(1)(A) of Public Law 110-90 requires that, if the 
Secretary determines that implementation of the MS-DRG system resulted 
in changes in documentation and coding that did not reflect real 
changes in case-mix for discharges occurring during FY 2008 or FY 2009 
that are different than the prospective documentation and coding 
adjustments applied under section 7(a) of Public Law 110-90, the 
Secretary shall make an appropriate adjustment under section 
1886(d)(3)(A)(vi) of the Act. Section 1886(d)(3)(A)(vi) of the Act 
authorizes adjustments to the average standardized amounts for 
subsequent fiscal years in order to eliminate the effect of such coding 
or classification changes. These adjustments are intended to ensure 
that future annual aggregate IPPS payments are the same as the payments 
that otherwise would have been made had the prospective adjustments for 
documentation and coding applied in FY 2008 and FY 2009 reflected the 
change that occurred in those years.
b. Recoupment or Repayment Adjustments in FYs 2010 Through 2012 
Required by Section 7(b)(1)(B) Public Law 110-90
    If, based on a retroactive evaluation of claims data, the Secretary 
determines that implementation of the MS-DRG system resulted in changes 
in documentation and coding that did not reflect real changes in case-
mix for discharges occurring during FY 2008 or FY 2009 that are 
different from the prospective documentation and coding adjustments 
applied under section 7(a) of Public Law 110-90, section 7(b)(1)(B) of 
Public Law 110-90 requires the Secretary to make an additional 
adjustment to the standardized amounts under section 1886(d) of the 
Act. This adjustment must offset the estimated increase or decrease in 
aggregate payments for FYs 2008 and 2009 (including interest) resulting 
from the difference between the estimated actual documentation and 
coding effect and the documentation and coding adjustment applied under 
section 7(a) of Public Law 110-90. This adjustment is in addition to 
making an appropriate adjustment to the standardized amounts under 
section 1886(d)(3)(A)(vi) of the Act as required by section 7(b)(1)(A) 
of Public Law 110-90. That is, these adjustments are intended to recoup 
(or repay, in the case of underpayments) spending in excess of (or less 
than) spending that would have occurred had the prospective adjustments 
for changes in documentation and coding applied in FY 2008 and FY 2009 
matched the changes that occurred in those years. Public Law 110-90 
requires that the Secretary only make these recoupment or repayment 
adjustments for discharges occurring during FYs 2010, 2011, and 2012.
3. Retrospective Evaluation of FY 2008 and FY 2009 Claims Data
    In order to implement the requirements of section 7 of Public Law 
110-90, we performed a retrospective evaluation of the FY 2008 data for 
claims paid through December 2008 using the methodology first described 
in

[[Page 24341]]

the FY 2009 IPPS/LTCH PPS final rule (73 FR 43768 and 43775) and later 
discussed in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43768 
through 43772). We performed the same analysis for FY 2009 claims data 
using the same methodology as we did for FY 2008 claims (75 FR 50057 
through 50068). The results of the analysis for the FY 2011 IPPS/LTCH 
PPS proposed and final rules, and subsequent evaluations in FY 2012, 
supported that the 5.4 percent estimate accurately reflected the FY 
2009 increases in documentation and coding under the MS-DRG system. We 
were persuaded by both MedPAC's analysis (as discussed in the FY 2011 
IPPS/LTCH PPS final rule (75 FR 50064 through 50065)) and our own 
review of the methodologies recommended by various commenters that the 
methodology we employed to determine the required documentation and 
coding adjustments was sound.
    As in prior years, the FY 2008, FY 2009, and FY 2010 MedPAR files 
are available to the public to allow independent analysis of the FY 
2008 and FY 2009 documentation and coding effects. Interested 
individuals may still order these files through the CMS Web site at: 
http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ by clicking on MedPAR Limited Data Set (LDS)-
Hospital (National). This CMS Web page describes the file and provides 
directions and further detailed instructions for how to order.
    Persons placing an order must send the following: A Letter of 
Request, the LDS Data Use Agreement and Research Protocol (refer to the 
Web site for further instructions), the LDS Form, and a check (refer to 
the Web site for the required payment amount) to:
    Mailing address if using the U.S. Postal Service: Centers for 
Medicare & Medicaid Services, RDDC Account, Accounting Division, P.O. 
Box 7520, Baltimore, MD 21207-0520.
    Mailing address if using express mail: Centers for Medicare & 
Medicaid Services, OFM/Division of Accounting-RDDC, 7500 Security 
Boulevard, C3-07-11, Baltimore, MD 21244-1850.
4. Prospective Adjustments for FY 2008 and FY 2009 Authorized by 
Section 7(b)(1)(A) of Public Law 110-90
    In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43767 
through 43777), we opted to delay the implementation of any 
documentation and coding adjustment until a full analysis of case-mix 
changes based on FY 2009 claims data could be completed. We refer 
readers to the FY 2010 IPPS/RY LTCH PPS final rule for a detailed 
description of our proposal, responses to comments, and finalized 
policy. After analysis of the FY 2009 claims data for the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50057 through 50073), we found a total 
prospective documentation and coding effect of 5.4 percent. After 
accounting for the -0.6 percent and the -0.9 percent documentation and 
coding adjustments in FYs 2008 and 2009, we found a remaining 
documentation and coding effect of 3.9 percent. As we have discussed, 
an additional cumulative adjustment of -3.9 percent would be necessary 
to meet the requirements of section 7(b)(1)(A) of Public Law 110-90 to 
make an adjustment to the average standardized amounts in order to 
eliminate the full effect of the documentation and coding changes that 
do not reflect real changes in case-mix on future payments. Unlike 
section 7(b)(1)(B) of Public Law 110-90, section 7(b)(1)(A) does not 
specify when we must apply the prospective adjustment, but merely 
requires us to make an ``appropriate'' adjustment. Therefore, as we 
stated in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50061), we 
believed the law provided some discretion as to the manner in which we 
applied the prospective adjustment of -3.9 percent. As we discussed 
extensively in the FY 2011 IPPS/LTCH PPS final rule, it has been our 
practice to moderate payment adjustments when necessary to mitigate the 
effects of significant downward adjustments on hospitals, to avoid what 
could be widespread, disruptive effects of such adjustments on 
hospitals. Therefore, we stated that we believed it was appropriate to 
not implement the -3.9 percent prospective adjustment in FY 2011 
because we finalized a -2.9 percent recoupment adjustment for that 
fiscal year. Accordingly, we did not propose a prospective adjustment 
under section 7(b)(1)(A) of Public Law 110-90 for FY 2011 (75 FR 23868 
through 23870). We noted that, as a result, payments in FY 2011 (and in 
each future fiscal year until we implemented the requisite adjustment) 
would be higher than they would have been if we had implemented an 
adjustment under section 7(b)(1)(A) of Public Law 110-90.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51489 and 51497), we 
indicated that, because further delay of this prospective adjustment 
would result in a continued accrual of unrecoverable overpayments, it 
was imperative that we implement a prospective adjustment for FY 2012, 
while recognizing CMS' continued desire to mitigate the effects of any 
significant downward adjustments to hospitals. Therefore, we 
implemented a -2.0 percent prospective adjustment to the standardized 
amount instead of the full -3.9 percent.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53274 through 
53276), we completed the prospective portion of the adjustment required 
under section 7(b)(1)(A) of Public Law 110-90 by finalizing a -1.9 
percent adjustment to the standardized amount for FY 2013. We stated 
that this adjustment would remove the remaining effect of the 
documentation and coding changes that do not reflect real changes in 
case-mix that occurred in FY 2008 and FY 2009. We believed that it was 
imperative to implement the full remaining adjustment, as any further 
delay would result in an overstated standardized amount in FY 2013 and 
any future fiscal years until a full adjustment was made.
    We noted again that delaying full implementation of the prospective 
portion of the adjustment required under section 7(b)(1)(A) of Public 
Law 110-90 until FY 2013 resulted in payments in FY 2010 through FY 
2012 being overstated. These overpayments could not be recovered by CMS 
because section 7(b)(1)(B) of Public Law 110-90 limited recoupments to 
overpayments made in FY 2008 and FY 2009.
5. Recoupment or Repayment Adjustment Authorized by Section 7(b)(1)(B) 
of Public Law 110-90
    Section 7(b)(1)(B) of Public Law 110-90 requires the Secretary to 
make an adjustment to the standardized amounts under section 1886(d) of 
the Act to offset the estimated increase or decrease in aggregate 
payments for FY 2008 and FY 2009 (including interest) resulting from 
the difference between the estimated actual documentation and coding 
effect and the documentation and coding adjustments applied under 
section 7(a) of Public Law 110-90. This determination must be based on 
a retrospective evaluation of claims data. Our actuaries estimated that 
there was a 5.8 percentage point difference resulting in an increase in 
aggregate payments of approximately $6.9 billion. Therefore, as 
discussed in the FY 2011 IPPS/LTCH PPS final rule (75 FR 50062 through 
50067), we determined that an aggregate adjustment of -5.8 percent in 
FYs 2011 and 2012 would be necessary in order to meet the requirements 
of section 7(b)(1)(B) of Public Law 110-90 to adjust the standardized 
amounts for discharges occurring in FYs 2010, 2011, and/or 2012 to 
offset the estimated amount of the increase in aggregate payments 
(including interest) in FYs 2008 and 2009.

[[Page 24342]]

    It is often our practice to phase in payment rate adjustments over 
more than one year in order to moderate the effect on payment rates in 
any one year. Therefore, consistent with the policies that we have 
adopted in many similar cases, in the FY 2011 IPPS/LTCH PPS final rule, 
we made an adjustment to the standardized amount of -2.9 percent, 
representing approximately one-half of the aggregate adjustment 
required under section 7(b)(1)(B) of Public Law 110-90, for FY 2011. An 
adjustment of this magnitude allowed us to moderate the effects on 
hospitals in one year while simultaneously making it possible to 
implement the entire adjustment within the timeframe required under 
section 7(b)(1)(B) of Public Law 110-90 (that is, no later than FY 
2012). For FY 2012, in accordance with the timeframes set forth by 
section 7(b)(1)(B) of Public Law 110-90, and consistent with the 
discussion in the FY 2011 IPPS/LTCH PPS final rule, we completed the 
recoupment adjustment by implementing the remaining -2.9 percent 
adjustment, in addition to removing the effect of the -2.9 percent 
adjustment to the standardized amount finalized for FY 2011 (76 FR 
51489 and 51498). Because these adjustments, in effect, balanced out, 
there was no year-to-year change in the standardized amount due to this 
recoupment adjustment for FY 2012. In the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53276), we made a final +2.9 percent adjustment to the 
standardized amount, completing the recoupment portion of section 
7(b)(1)(B) of Public Law 110-90. We note that with this positive 
adjustment, according to our estimates, all overpayments made in FY 
2008 and FY 2009 have been fully recaptured with appropriate interest, 
and the standardized amount has been returned to the appropriate 
baseline.
6. Proposed Recoupment or Repayment Adjustment Authorized by Section 
631 of the American Taxpayer Relief Act of 2012 (ATRA)
    Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law 
110-90 to require the Secretary to make a recoupment adjustment or 
adjustments totaling $11 billion by FY 2017. This adjustment represents 
the amount of the increase in aggregate payments as a result of not 
completing the prospective adjustment authorized under section 
7(b)(1)(A) of Public Law 110-90 until FY 2013. As discussed earlier, 
this delay in implementation resulted in overstated payment rates in 
FYs 2010, 2011, and 2012. The resulting overpayments could not have 
been recovered under Public Law 110-90.
    Similar to the adjustments authorized under section 7(b)(1)(B) of 
Public Law 110-90, the adjustment required under section 631 of the 
ATRA is a one-time recoupment of a prior overpayment, not a permanent 
reduction to payment rates. Therefore, any adjustment made to reduce 
payment rates in one year would eventually be offset by a positive 
adjustment, once the necessary amount of overpayment is recovered.
    As we stated in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50515 
through 50517), our actuaries estimate that a -9.3 percent adjustment 
to the standardized amount would be necessary if CMS were to fully 
recover the $11 billion recoupment required by section 631 of the ATRA 
in FY 2014. It is often our practice to phase in payment rate 
adjustments over more than one year, in order to moderate the effect on 
payment rates in any one year. Therefore, consistent with the policies 
that we have adopted in many similar cases, and after consideration of 
the public comments we received, in the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50515 through 50517), we implemented a -0.8 percent 
recoupment adjustment to the standardized amount in FY 2014. We stated 
that if adjustments of approximately -0.8 percent are implemented in 
FYs 2014, 2015, 2016, and 2017, using standard inflation factors, we 
estimate that the entire $11 billion will be accounted for by the end 
of the statutory 4-year timeline. As estimates of any future 
adjustments are subject to slight variations in total savings, we did 
not provide for specific adjustments for FYs 2015, 2016, or 2017 at 
that time. We stated that we believed that this level of adjustment for 
FY 2014 was a reasonable and fair approach that satisfies the 
requirements of the statute while mitigating extreme annual 
fluctuations in payment rates.
    Consistent with the approach discussed in the FY 2014 IPPS/LTCH PPS 
final rule for recouping the $11 billion required by section 631 of the 
ATRA, in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49873 through 
49874), we implemented an additional -0.8 percent recoupment adjustment 
to the standardized amount for FY 2015. We estimated that this level of 
adjustment, combined with leaving the -0.8 percent adjustment made for 
FY 2014 in place, will recover up to $2 billion in FY 2015. When 
combined with the approximately $1 billion adjustment made in FY 2014, 
we estimated that approximately $8 billion would be left to recover 
under section 631 of the ATRA.
    Consistent with the approach discussed in the FY 2014 IPPS/LTCH PPS 
final rule for recouping the $11 billion required by section 631 of the 
ATRA, in this FY 2016 IPPS/LTCH PPS proposed rule, we are proposing to 
implement a -0.8 percent recoupment adjustment to the standardized 
amount for FY 2016. Considering the -0.8 percent adjustments made in FY 
2014 and FY 2015, we estimate that the combined impact of the proposed 
adjustment for FY 2016 and leaving the FY 2014 and FY 2015 adjustments 
in place would be to recover up to $3 billion in FY 2016. Combined with 
the effects of the -0.8 percent adjustments implemented in FY 2014 and 
FY 2015, we estimate that the proposed FY 2016 -0.8 percent adjustment 
would result in the recovery of a total of approximately $6 billion of 
the $11 billion in overpayments required to be recovered by section 631 
of the ATRA.
    As we explained in the FY 2014 IPPS/LTCH PPS final rule, estimates 
of any future adjustments are subject to slight variations in total 
savings. Therefore, we have not yet addressed the specific amount of 
the final adjustment required under section 631 of the ATRA for FY 
2017. We continue to believe that the proposed -0.8 percent adjustment 
for FY 2016 is a reasonable and fair approach that will help satisfy 
the requirements of the statute while mitigating extreme annual 
fluctuations in payment rates. In addition, we again note that this 
proposed -0.8 percent recoupment adjustment for FY 2016, the respective 
-0.8 percent adjustments made in FY 2014 and FY 2015, and any future 
adjustment made under this authority, will be eventually offset by an 
equivalent positive adjustment once the full $11 billion recoupment 
requirement has been realized.

E. Refinement of the MS-DRG Relative Weight Calculation

1. Background
    Beginning in FY 2007, we implemented relative weights for DRGs 
based on cost report data instead of charge information. We refer 
readers to the FY 2007 IPPS final rule (71 FR 47882) for a detailed 
discussion of our final policy for calculating the cost-based DRG 
relative weights and to the FY 2008 IPPS final rule with comment period 
(72 FR 47199) for information on how we blended relative weights based 
on the CMS DRGs and MS-DRGs.
    As we implemented cost-based relative weights, some public 
commenters raised concerns about potential bias in the weights due to 
``charge compression,'' which is the practice of applying a higher 
percentage charge markup over costs to lower cost items and services, 
and a lower

[[Page 24343]]

percentage charge markup over costs to higher cost items and services. 
As a result, the cost-based weights would undervalue high-cost items 
and overvalue low-cost items if a single cost-to-charge ratio (CCR) is 
applied to items of widely varying costs in the same cost center. To 
address this concern, in August 2006, we awarded a contract to the 
Research Triangle Institute, International (RTI) to study the effects 
of charge compression in calculating the relative weights and to 
consider methods to reduce the variation in the CCRs across services 
within cost centers. For a detailed summary of RTI's findings, 
recommendations, and public comments that we received on the report, we 
refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR 48452 
through 48453). In addition, we refer readers to RTI's July 2008 final 
report titled ``Refining Cost to Charge Ratios for Calculating APC and 
MS-DRG Relative Payment Weights'' (http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_Ratios_200807_Final.pdf).
    In the FY 2009 IPPS final rule (73 FR 48458 through 48467), in 
response to the RTI's recommendations concerning cost report 
refinements, we discussed our decision to pursue changes to the cost 
report to split the cost center for Medical Supplies Charged to 
Patients into one line for ``Medical Supplies Charged to Patients'' and 
another line for ``Implantable Devices Charged to Patients.'' We 
acknowledged, as RTI had found, that charge compression occurs in 
several cost centers that exist on the Medicare cost report. However, 
as we stated in the FY 2009 IPPS final rule, we focused on the CCR for 
Medical Supplies and Equipment because RTI found that the largest 
impact on the MS-DRG relative weights could result from correcting 
charge compression for devices and implants. In determining the items 
that should be reported in these respective cost centers, we adopted 
the commenters' recommendations that hospitals should use revenue codes 
established by the AHA's National Uniform Billing Committee to 
determine the items that should be reported in the ``Medical Supplies 
Charged to Patients'' and the ``Implantable Devices Charged to 
Patients'' cost centers. Accordingly, a new subscripted line for 
``Implantable Devices Charged to Patients'' was created in July 2009. 
This new subscripted cost center has been available for use for cost 
reporting periods beginning on or after May 1, 2009.
    As we discussed in the FY 2009 IPPS final rule (73 FR 48458) and in 
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68519 
through 68527), in addition to the findings regarding implantable 
devices, RTI also found that the costs and charges of computed 
tomography (CT) scans, magnetic resonance imaging (MRI), and cardiac 
catheterization differ significantly from the costs and charges of 
other services included in the standard associated cost center. RTI 
also concluded that both the IPPS and the OPPS relative weights would 
better estimate the costs of those services if CMS were to add standard 
cost centers for CT scans, MRIs, and cardiac catheterization in order 
for hospitals to report separately the costs and charges for those 
services and in order for CMS to calculate unique CCRs to estimate the 
costs from charges on claims data. In the FY 2011 IPPS/LTCH PPS final 
rule (75 FR 50075 through 50080), we finalized our proposal to create 
standard cost centers for CT scans, MRIs, and cardiac catheterization, 
and to require that hospitals report the costs and charges for these 
services under new cost centers on the revised Medicare cost report 
Form CMS-2552-10. (We refer readers to the FY 2011 IPPS/LTCH PPS final 
rule (75 FR 50075 through 50080) for a detailed discussion of the 
reasons for the creation of standard cost centers for CT scans, MRIs, 
and cardiac catheterization.) The new standard cost centers for CT 
scans, MRIs, and cardiac catheterization are effective for cost 
reporting periods beginning on or after May 1, 2010, on the revised 
cost report Form CMS-2552-10.
    In the FY 2009 IPPS final rule (73 FR 48468), we stated that, due 
to what is typically a 3-year lag between the reporting of cost report 
data and the availability for use in ratesetting, we anticipated that 
we might be able to use data from the new ``Implantable Devices Charged 
to Patients'' cost center to develop a CCR for ``Implantable Devices 
Charged to Patients'' in the FY 2012 or FY 2013 IPPS rulemaking cycle. 
However, as noted in the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 
FR 43782), due to delays in the issuance of the revised cost report 
Form CMS 2552-10, we determined that a new CCR for ``Implantable 
Devices Charged to Patients'' might not be available before FY 2013. 
Similarly, when we finalized the decision in the FY 2011 IPPS/LTCH PPS 
final rule to add new cost centers for CT scans, MRIs, and cardiac 
catheterization, we explained that data from any new cost centers that 
may be created will not be available until at least 3 years after they 
are first used (75 FR 50077). In preparation for the FY 2012 IPPS/LTCH 
PPS rulemaking, we checked the availability of data in the 
``Implantable Devices Charged to Patients'' cost center on the FY 2009 
cost reports, but we did not believe that there was a sufficient amount 
of data from which to generate a meaningful analysis in this particular 
situation. Therefore, we did not propose to use data from the 
``Implantable Devices Charged to Patients'' cost center to create a 
distinct CCR for ``Implantable Devices Charged to Patients'' for use in 
calculating the MS-DRG relative weights for FY 2012. We indicated that 
we would reassess the availability of data for the ``Implantable 
Devices Charged to Patients'' cost center for the FY 2013 IPPS/LTCH PPS 
rulemaking cycle and, if appropriate, we would propose to create a 
distinct CCR at that time.
    During the development of the FY 2013 IPPS/LTCH PPS proposed and 
final rules, hospitals were still in the process of transitioning from 
the previous cost report Form CMS-2552-96 to the new cost report Form 
CMS-2552-10. Therefore, we were able to access only those cost reports 
in the FY 2010 HCRIS with fiscal year begin dates on or after October 
1, 2009, and before May 1, 2010; that is, those cost reports on Form 
CMS-2552-96. Data from the Form CMS-2552-10 cost reports were not 
available because cost reports filed on the Form CMS-2552-10 were not 
accessible in the HCRIS. Further complicating matters was that, due to 
additional unforeseen technical difficulties, the corresponding 
information regarding charges for implantable devices on hospital 
claims was not yet available to us in the MedPAR file. Without the 
breakout in the MedPAR file of charges associated with implantable 
devices to correspond to the costs of implantable devices on the cost 
report, we believed that we had no choice but to continue computing the 
relative weights with the current CCR that combines the costs and 
charges for supplies and implantable devices. We stated in the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53281 through 53283) that when we do 
have the necessary data for supplies and implantable devices on the 
claims in the MedPAR file to create distinct CCRs for the respective 
cost centers for supplies and implantable devices, we hoped that we 
would also have data for an analysis of creating distinct CCRs for CT 
scans, MRIs, and cardiac catheterization, which could then be finalized 
through rulemaking. In the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53281), we stated that, prior to proposing to create these

[[Page 24344]]

CCRs, we would first thoroughly analyze and determine the impacts of 
the data, and that distinct CCRs for these new cost centers would be 
used in the calculation of the relative weights only if they were first 
finalized through rulemaking.
    At the time of the development of the FY 2014 IPPS/LTCH PPS 
proposed rule (78 FR 27506 through 27507), we had a substantial number 
of hospitals completing all, or some, of these new cost centers on the 
FY 2011 Medicare cost reports, compared to prior years. We stated that 
we believed that the analytic findings described using the FY 2011 cost 
report data and FY 2012 claims data supported our original decision to 
break out and create new cost centers for implantable devices, MRIs, CT 
scans, and cardiac catheterization, and we saw no reason to further 
delay proposing to implement the CCRs of each of these cost centers. 
Therefore, beginning in FY 2014, we proposed a policy to calculate the 
MS-DRG relative weights using 19 CCRs, creating distinct CCRs from cost 
report data for implantable devices, MRIs, CT scans, and cardiac 
catheterization.
    We refer readers to the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 
27507 through 27509) and final rule (78 FR 50518 through 50523) in 
which we presented data analyses using distinct CCRs for implantable 
devices, MRIs, CT scans, and cardiac catheterization. The FY 2014 IPPS/
LTCH PPS final rule also set forth our responses to public comments we 
received on our proposal to implement these CCRs. As explained in more 
detail in the FY 2014 IPPS/LTCH PPS final rule, we finalized our 
proposal to use 19 CCRs to calculate MS-DRG relative weights beginning 
in FY 2014--the then existing 15 cost centers and the 4 new CCRs for 
implantable devices, MRIs, CT scans, and cardiac catheterization. 
Therefore, beginning in FY 2014, we calculate the IPPS MS-DRG relative 
weights using 19 CCRs, creating distinct CCRs for implantable devices, 
MRIs, CT scans, and cardiac catheterization.
2. Discussion for FY 2016 and Request for Comments on Nonstandard Cost 
Center Codes
    Consistent with the policy established beginning for FY 2014, we 
calculated the proposed MS-DRG relative weights for FY 2016 using two 
data sources: The MedPAR file as the claims data source and the HCRIS 
as the cost report data source. We adjusted the charges from the claims 
to costs by applying the 19 national average CCRs developed from the 
cost reports. The description of the calculation of the proposed 19 
CCRs and the proposed MS-DRG relative weights for FY 2016 is included 
in section II.H.3. of the preamble of this proposed rule.
    In preparing to calculate the 19 national average CCRs developed 
from the cost reports, we reviewed the HCRIS data and noticed 
inconsistencies in hospitals' cost reporting and use of nonstandard 
cost center codes. In addition, we discovered that hospitals typically 
report the nonstandard codes with standard cost centers that are 
different from the standard cost centers to which CMS maps and ``rolls 
up'' each nonstandard code in compiling the HCRIS. We are concerned 
that inconsistencies in hospitals' use of nonstandard codes, coupled 
with differences in the way hospitals and CMS map these nonstandard 
codes to standard lines, may have implications for the calculation of 
the 19 CCRs and the aspects of the IPPS that rely on the CCRs (for 
example, the calculation of the MS-DRG relative weights).
    The Medicare cost report Form CMS-2552-10, Worksheet A, includes 
preprinted cost center codes that reflect the standard cost center 
descriptions by category (General Service, Routine, and Ancillary) used 
in most hospitals. Each preprinted standard cost center is assigned a 
unique 5-digit code. The preprinted 5-digit codes provide standardized 
meaning for data analysis, and are automatically coded by CMS-approved 
cost report software. To accommodate hospitals that have additional 
cost centers that are sufficiently different from the preprinted 
standard cost centers, CMS identified additional cost centers known as 
``nonstandard'' cost centers. Each nonstandard cost center must be 
labeled appropriately and reported under a specific standard cost 
center. For example, under the standard cost center 
``Electrocardiology'' with its 5-digit code of 06900, there are six 
nonstandard cost centers (for EKG and EEG, Electromyography, 
Cardiopulmonary, Stress Test, Cardiology, and Holter Monitor), each 
with a unique 5-digit code.
    The instructions for the Medicare cost report Form CMS-2552-10 
explain the purpose and requirements related to the standard and 
nonstandard cost centers. Specifically, in CMS Pub. 15-2, Chapter 40, 
Section 4013, the instructions for Worksheet A of Form CMS-2552-10 
state:
    ``Cost center coding is a methodology for standardizing the meaning 
of cost center labels as used by health care providers on the Medicare 
cost report. Form CMS-2552-10 provides for preprinted cost center 
descriptions on Worksheet A. In addition, a space is provided for a 
cost center code. The preprinted cost center labels are automatically 
coded by CMS approved cost reporting software. These cost center 
descriptions are hereafter referred to as the standard cost centers. 
Additionally, nonstandard cost center descriptions have been identified 
through analysis of frequently used labels.
    The use of this coding methodology allows providers to continue to 
use labels for cost centers that have meaning within the individual 
institution. The five digit cost center codes that are associated with 
each provider label in their electronic file provide standardized 
meaning for data analysis. You are required to compare any added or 
changed label to the descriptions offered on the standard or 
nonstandard cost center tables. A description of cost center coding and 
the table of cost center codes are in Sec.  4095, Table 5.''
    Section 4095 of CMS Pub. 15-2 (pages 40-805 and 40-806) further 
provides that:
    ``Both the standard and nonstandard cost center descriptions along 
with their cost center codes are shown on Table 5. . . . Cost center 
codes may only be used in designated lines in accordance with the 
classification of the cost center(s), i.e., lines 1 through 23 may only 
contain cost center codes within the general service cost center 
category of both standard and nonstandard coding. For example, in the 
general service cost center category for Operation of Plant cost, line 
7 and subscripts thereof should only contain cost center codes of 
00700-00719 and nonstandard cost center codes. This logic must hold 
true for all other cost center categories, i.e., ancillary, inpatient 
routine, outpatient, other reimbursable, special purpose, and non- 
reimbursable cost centers.''
    Table 5 of Section 4095, Chapter 40, of CMS Pub. 15-2 (pages 40-807 
through 40-810) lists the electronic reporting specifications for each 
standard cost center, its 5-digit code, and, separately, the 
nonstandard cost center descriptions and their 5-digit codes. While the 
nonstandard codes are categorized by General Service Cost Centers, 
Inpatient Routine Service Cost Centers, and Ancillary Service Cost 
Centers, among others, Table 5 does not map the nonstandard cost 
centers and codes to specific standard cost centers. In addition, the 
CMS-approved cost reporting software does not restrict the use of 
nonstandard codes to specific standard cost centers. Furthermore, the 
softwares do not prevent hospitals from manually entering in a name for 
a nonstandard cost center code that may

[[Page 24345]]

be different from the name that CMS assigned to that nonstandard cost 
center code. For example, Table 5 specifies that the 5-digit code for 
the Ancillary Service nonstandard cost center ``Acupuncture'' is 03020. 
When CMS creates the HCRIS SAS files, CMS maps all codes 03020 to 
standard line 53, ``Anesthesiology''.\1\ However, a review of the 
December 31, 2014 update of the FY 2013 HCRIS SAS files, from which the 
proposed 19 CCRs for FY 2016 are calculated, reveals that, of the 3,172 
times that nonstandard code 03020 is reported by hospitals, it is 
called ``Acupuncture'' only 122 times. Instead, hospitals use various 
names for nonstandard code 03020, such as ``Cardiopulmonary,'' ``Sleep 
Lab,'' ``Diabetes Center,'' or ``Wound Care''.
---------------------------------------------------------------------------

    \1\ To view how CMS rolls up the codes to create the HCRIS SAS 
files, we refer readers to http://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/Cost-Reports/Hospital-2010-form.html. On this page, click on ``Hospital-2010-
SAS.ZIP (SAS datasets and documentation)'', and from the zip file, 
choose the Excel spreadsheet ``2552-10 SAS FILE RECORD LAYOUT AND 
CROSSWALK TO 96.xlsx''. The second tab of this spreadsheet is ``NEW 
ROLLUPS'', and shows the standard and nonstandard 5-digit codes 
(columns B and C) that CMS rolls up to each standard line (column 
G).
---------------------------------------------------------------------------

    As noted above, the Ancillary Service standard cost center for 
``Anesthesiology'', line 53 of Worksheet A and subsequent worksheets of 
the Medicare cost report Form CMS-2552-10 (and its associated 
nonstandard cost center code 03020 ``Acupuncture'') is an example of a 
cost center that is subject to inconsistent reporting. Our review of 
the FY 2013 HCRIS as-submitted cost reports from which the proposed 19 
CCRs for FY 2016 are calculated revealed that, regardless of the actual 
name hospitals assigned to nonstandard code 03020 (for example, 
``Acupuncture'' or otherwise), hospitals reported this code almost 100 
percent of the time on standard line 76, ``Other Ancillary,'' and never 
on standard line 53, ``Anesthesiology.'' Yet, as noted above, CMS (and 
previously HCFA, under earlier versions of the Medicare cost report), 
in creating the HCRIS database, has had the longstanding practice of 
mapping and rolling up all instances of nonstandard code 03020 to 
standard line 53, ``Anesthesiology,'' not to standard line 76, ``Other 
Ancillary. Therefore, the version of the HCRIS SAS files created by 
CMS, which CMS uses for ratesetting purposes, may differ somewhat from 
the as-submitted cost reports of hospitals because CMS moves various 
nonstandard cost centers based on cost center codes, not cost center 
descriptions, from the standard cost centers in which hospitals report 
them and places them in different standard cost centers based on CMS' 
roll-up specifications.
    We are highlighting the discrepancy in the reporting of nonstandard 
code 03020 ``Acupuncture'' because the placement of nonstandard code 
03020 and its related costs and charges seem to have the most 
significant implications for the calculation of one of the 19 CCRs, the 
Anesthesia CCR. As stated in section II.H.3. of the preamble of this 
proposed rule, the proposed FY 2016 CCR for Anesthesia is 0.108. We 
calculated this proposed CCR based on the December 31, 2014 update of 
the FY 2013 HCRIS, with the nonstandard cost center codes of 03020 
through 03029 rolled up to standard line 53, ``Anesthesiology.'' That 
is, under the CMS' HCRIS specifications, we roll up the following 5-
digit codes to standard line 53, ``Anesthesiology'': \2\ standard codes 
for ``Anesthesiology'' 05300 through 05329; and nonstandard codes for 
``Acupuncture '' 03020 through 03029. For simulation purposes, we also 
created a version of the December 31, 2014 update of the FY 2013 HCRIS 
which retains nonstandard codes 03020 through 03029 on standard line 
76, ``Other Ancillary,'' where hospitals actually reported these codes 
on their as-submitted FY 2013 cost reports. When all reported uses of 
nonstandard codes 03020 through 03029 remain on standard line 76, 
``Other Ancillary,'' we calculated that the Anesthesia CCR would be 
0.084 (instead of 0.108 as proposed in section II.H.3. of the preamble 
of this proposed rule). We also looked at the effect on the other 18 
CCRs. In the version of HCRIS we created for simulation purposes, by 
keeping the nonstandard cost center codes in standard line 76, ``Other 
Ancillary,'' where hospitals typically report them, rather than 
remapping them according to CMS specifications, two other CCRs also are 
affected, although not quite as significantly as the Anesthesia CCR. 
Currently, as proposed in section II.H.3. of the preamble of this 
proposed rule, the proposed FY 2016 Cardiology CCR is 0.119, but when 
all cardiology-related nonstandard codes are rolled up to standard line 
76, ``Other Ancillary'', and not to standard line 69, 
``Electrocardiology'' as under CMS' usual practice, the Cardiology CCR 
would be 0.113. In addition, as proposed in section II.H.3. of the 
preamble of this proposed rule, the proposed FY 2016 Radiology CCR is 
0.159, but when all radiology-related nonstandard codes are rolled up 
to standard line 76, ``Other Ancillary'', and not to standard lines 54 
(Radiology--Diagnostic), 55 (Radiology--Therapeutic), and 56 
(Radioisotope) as under CMS' usual practice, the Radiology CCR would be 
0.161. Most notably, the CCR that is most impacted is the ``Other 
Services'' CCR. Currently, as proposed in section II.H.3. of the 
preamble of this proposed rule, the ``Other Services'' CCR is 0.367. 
However, if all nonstandard cost center codes would remain in line 76, 
``Other Ancillary'' as hospitals have reported them in their FY 2013 
as-submitted cost reports, instead of CMS applying its usual practice 
of rolling up these lines to the applicable ``Electrocardiology'' and 
``Radiology'' standard cost centers, among others, the ``Other 
Services'' CCR would be 0.291. We note that we observed minimal or no 
differences in the remaining 15 CCRs, when their associated nonstandard 
cost centers were rolled up to their specific standard cost centers, 
versus being rolled up to the standard line 76, ``Other Ancillary.''
---------------------------------------------------------------------------

    \2\ Ibid.
---------------------------------------------------------------------------

    The differences in these CCRs computed from the HCRIS that was 
compiled by applying CMS' current rollup procedures of assigning 
nonstandard codes to specific standard cost centers, as compared to 
following hospitals' general practice of reporting nonstandard codes 
``en masse'' on line 76, ``Other Ancillary,'' have implications for the 
aspects of the IPPS that rely on the CCRs (for example, the calculation 
of the MS-DRG relative weights). Some questions that arise are whether 
CMS' procedures for mapping and rolling up nonstandard cost centers to 
specific standard cost centers should be updated or whether hospital 
reporting practices are imprecise, or whether there is a combination of 
both. CMS' rollup procedures were developed many years ago based on 
historical analysis of hospitals' cost reporting practices and health 
care services furnished. It may be that it would be appropriate for CMS 
to reevaluate its rollup procedures based on hospitals' more current 
cost reporting practices and contemporary health care services 
provided. However, one factor complicating the determination of the 
most accurate standard cost centers to which each respective 
nonstandard cost center should be mapped is hospitals' own inconsistent 
reporting practices. For example, it may be determined that CMS should 
no longer be mapping and rolling up nonstandard cost center 
``Acupuncture'' and its associated 5-digit codes 03020 through 03029 to 
standard cost center line 53, ``Anesthesiology.'' However, determining 
which other standard line

[[Page 24346]]

``Acupuncture'' and its associated 5-digit codes 03020 through 03029 
should be mapped is unclear, given that, as mentioned above, out of the 
3,172 times that codes 03020 through 03029 were reported in the FY 2013 
HCRIS file, hospitals called these codes ``Acupuncture'' only 122 
times, and instead called these codes a variety of other names (such as 
Cardiopulmonary, Sleep Lab, Wound Care, Diabetes Center, among others). 
Therefore, without being able to determine the true nature of the 
services that were actually provided, it is difficult to know which 
standard cost center to map these services. That is, the question 
arises as to whether the service provided was acupuncture because a 
hospital reported code 03020, or whether the service provided was 
cardiopulmonary, which was the name a hospital assigned to code 03020. 
Furthermore, if the service provided was in fact cardiopulmonary, then, 
as Table 5 of Section 4095 of CMS Pub. 15-2 indicates, the correct 
nonstandard code for cardiopulmonary is 03160, not 03020. A related 
question would then be, if the hospital provided cardiopulmonary 
services, which are clearly related to cardiology, why did the hospital 
report those costs and charges on line 76, ``Other Ancillary,'' instead 
of subscripting standard line 69, ``Electrocardiology,'' and reporting 
the cardiopulmonary costs and charges there.
    In summary, we believe that the differences between the standard 
cost centers to which CMS assigns nonstandard codes when CMS rolls up 
cost report data to create the HCRIS SAS database, and the standard 
cost centers to which hospitals tend to assign and use nonstandard 
codes, coupled with the inconsistencies found in hospitals' use and 
naming of the nonstandard codes, have implications for the aspects of 
the IPPS that rely on the CCRs. For example, we have explained above 
and provided examples of how the CCRs used to calculate the MS-DRG 
relative weights could change, based on where certain nonstandard codes 
are reported and rolled up in the cost reports. However, before 
considering changes to our longstanding practices, we are interested in 
receiving public comments from stakeholders as to how to improve the 
use of nonstandard cost center codes. One option might be for CMS to 
allow only certain nonstandard codes to be used with certain standard 
cost centers, meaning that CMS might require that the CMS-approved cost 
reporting softwares ``lock in'' those nonstandard codes with their 
assigned standard cost centers. For example, if a hospital wishes to 
subscript a standard cost center, the cost reporting software might 
allow the hospital to choose only from a predetermined set of 
nonstandard codes. Therefore, for example, if a hospital wished to 
report Cardiopulmonary costs and charges on its cost report, the only 
place that the hospital could do that under this approach would be from 
a drop down list of cardiology-related services on standard line 69, 
``Electrocardiology,'' and not on another line (not even line 76, 
``Other Ancillary''). Some flexibility could be maintained, but within 
certain limits, in consideration of unique services that hospitals 
might provide.
    In the interim, while we seek public comments on this issue, we 
have proposed 19 CCRs for FY 2016 (listed in section II.H.3. of the 
preamble of this proposed rule) that were calculated from the December 
31, 2014 update of the FY 2013 HCRIS, created in accordance with CMS' 
current longstanding procedures for mapping and rolling up nonstandard 
cost center codes. As we did with the FY 2015 IPPS/LTCH PPS final rule, 
we are providing the version of the HCRIS from which we calculated 
these proposed 19 CCRs on the FY 2016 IPPS Proposed Rule Home Page at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2016-IPPS-Proposed-Rule-Home-Page.html.\3\
---------------------------------------------------------------------------

    \3\ Ibid.
---------------------------------------------------------------------------

F. Proposed Adjustment to MS-DRGs for Preventable Hospital-Acquired 
Conditions (HACs), Including Infections for FY 2016

1. Background
    Section 1886(d)(4)(D) of the Act addresses certain hospital-
acquired conditions (HACs), including infections. This provision is 
part of an array of Medicare tools that we are using to promote 
increased quality and efficiency of care. Under the IPPS, hospitals are 
encouraged to treat patients efficiently because they receive the same 
DRG payment for stays that vary in length and in the services provided, 
which gives hospitals an incentive to avoid unnecessary costs in the 
delivery of care. In some cases, conditions acquired in the hospital do 
not generate higher payments than the hospital would otherwise receive 
for cases without these conditions. To this extent, the IPPS encourages 
hospitals to avoid complications.
    However, the treatment of these conditions can generate higher 
Medicare payments in two ways. First, if a hospital incurs 
exceptionally high costs treating a patient, the hospital stay may 
generate an outlier payment. However, because the outlier payment 
methodology requires that hospitals experience large losses on outlier 
cases before outlier payments are made, hospitals have an incentive to 
prevent outliers. Second, under the MS-DRG system that took effect in 
FY 2008 and that has been refined through rulemaking in subsequent 
years, certain conditions can generate higher payments even if the 
outlier payment requirements are not met. Under the MS-DRG system, 
there are currently 261 sets of MS-DRGs that are split into 2 or 3 
subgroups based on the presence or absence of a complication or 
comorbidity (CC) or a major complication or comorbidity (MCC). The 
presence of a CC or an MCC generally results in a higher payment.
    Section 1886(d)(4)(D) of the Act specifies that, by October 1, 
2007, the Secretary was required to select, in consultation with the 
Centers for Disease Control and Prevention (CDC), at least two 
conditions that: (a) Are high cost, high volume, or both; (b) are 
assigned to a higher paying MS-DRG when present as a secondary 
diagnosis (that is, conditions under the MS-DRG system that are CCs or 
MCCs); and (c) could reasonably have been prevented through the 
application of evidence-based guidelines. Section 1886(d)(4)(D) of the 
Act also specifies that the list of conditions may be revised, again in 
consultation with the CDC, from time to time as long as the list 
contains at least two conditions.
    Effective for discharges occurring on or after October 1, 2008, 
under the authority of section 1886(d)(4)(D) of the Act, Medicare no 
longer assigns an inpatient hospital discharge to a higher paying MS-
DRG if a selected condition is not present on admission (POA). Thus, if 
a selected condition that was not POA manifests during the hospital 
stay, it is considered a HAC and the case is paid as though the 
secondary diagnosis was not present. However, even if a HAC manifests 
during the hospital stay, if any nonselected CC or MCC appears on the 
claim, the claim will be paid at the higher MS-DRG rate. In addition, 
Medicare continues to assign a discharge to a higher paying MS-DRG if a 
selected condition is POA. When a HAC is not POA, payment can be 
affected in a manner shown in the diagram below.

[[Page 24347]]

[GRAPHIC] [TIFF OMITTED] TP30AP15.000

2. HAC Selection
    Beginning in FY 2007, we have set forth proposals, and solicited 
and responded to public comments, to implement section 1886(d)(4)(D) of 
the Act through the IPPS annual rulemaking process. For specific 
policies addressed in each rulemaking cycle, including a detailed 
discussion of the collaborative interdepartmental process and public 
input regarding selected and potential candidate HACs, we refer readers 
to the following rules: The FY 2007 IPPS proposed rule (71 FR 24100) 
and final rule (71 FR 48051 through 48053); the FY 2008 IPPS proposed 
rule (72 FR 24716 through 24726) and final rule with comment period (72 
FR 47200 through 47218); the FY 2009 IPPS proposed rule (73 FR 23547) 
and final rule (73 FR 48471); the FY 2010 IPPS/RY 2010 LTCH PPS 
proposed rule (74 FR 24106) and final rule (74 FR 43782); the FY 2011 
IPPS/LTCH PPS proposed rule (75 FR 23880) and final rule (75 FR 50080); 
the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25810 through 25816) and 
final rule (76 FR 51504 through 51522); the FY 2013 IPPS/LTCH PPS 
proposed rule (77 FR 27892 through 27898) and final rule (77 FR 53283 
through 53303); the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27509 
through 27512) and final rule (78 FR 50523 through 50527), and the FY 
2015 IPPS/LTCH PPS proposed rule (79 FR 28000 through 28003) and final 
rule (79 FR 49876 through 49880). A complete list of the 11 current 
categories of HACs is included on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Hospital-Acquired_Conditions.html.
3. Present on Admission (POA) Indicator Reporting
    Collection of POA indicator data is necessary to identify which 
conditions were acquired during hospitalization for the HAC payment 
provision as well as for broader public health uses of Medicare data. 
In previous rulemaking, we provided both CMS and CDC Web site resources 
that are available to hospitals for assistance in this reporting 
effort. For detailed information regarding these sites and materials, 
including the application and use of POA indicators, we refer the 
reader to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 through 
51507).
    Currently, as we have discussed in the prior rulemaking cited under 
section II.I.2. of the preamble of this proposed rule, the POA 
indicator reporting requirement only applies to IPPS hospitals and 
Maryland hospitals because they are subject to this HAC provision. Non-
IPPS hospitals, including CAHs, LTCHs, IRFs, IPFs, cancer hospitals, 
children's hospitals, RNHCIs, and the Department of Veterans Affairs/
Department of Defense hospitals, are exempt from POA reporting.
    There are currently four POA indicator reporting options, ``Y'', 
``W'', ``N'', and ``U'', as defined by the ICD-9-CM Official Guidelines 
for Coding and Reporting. We note that prior to January 1, 2011, we 
also used a POA indicator reporting option ``1''. However, beginning on 
or after January 1, 2011, hospitals were required to begin reporting 
POA indicators using the 5010 electronic transmittal standards format. 
The 5010 format removes the need to report a POA indicator of ``1'' for 
codes that are exempt from POA reporting. We issued CMS instructions on 
this reporting change as a One-Time Notification, Pub. No. 100-20, 
Transmittal No. 756, Change Request 7024, effective on August 13, 2010, 
which can be located at the following link on the CMS Web site: http://www.cms.gov/manuals/downloads/Pub100_20.pdf. The current POA indicators 
and their descriptors are shown in the chart below:

 
------------------------------------------------------------------------
     Indicator                           Descriptor
------------------------------------------------------------------------
Y.................  Indicates that the condition was present on
                     admission.
W.................  Affirms that the hospital has determined that, based
                     on data and clinical judgment, it is not possible
                     to document when the onset of the condition
                     occurred.
N.................  Indicates that the condition was not present on
                     admission.
U.................  Indicates that the documentation is insufficient to
                     determine if the condition was present at the time
                     of admission.
------------------------------------------------------------------------


[[Page 24348]]

    Under the HAC payment policy, we treat HACs coded with ``Y'' and 
``W'' indicators as POA and allow the condition on its own to cause an 
increased payment at the CC and MCC level. We treat HACs coded with 
``N'' and ``U'' indicators as Not Present on Admission (NPOA) and do 
not allow the condition on its own to cause an increased payment at the 
CC and MCC level. We refer readers to the following rules for a 
detailed discussion of POA indicator reporting: the FY 2009 IPPS 
proposed rule (73 FR 23559) and final rule (73 FR 48486 through 48487); 
the FY 2010 IPPS/RY 2010 LTCH PPS proposed rule (74 FR 24106) and final 
rule (74 FR 43784 through 43785); the FY 2011 IPPS/LTCH PPS proposed 
rule (75 FR 23881 through 23882) and final rule (75 FR 50081 through 
50082); the FY 2012 IPPS/LTCH PPS proposed rule (76 FR 25812 through 
25813) and final rule (76 FR 51506 through 51507); the FY 2013 IPPS/
LTCH PPS proposed rule (77 FR 27893 through 27894) and final rule (77 
FR 53284 through 53285); the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 
27510 through 27511) and final rule (78 FR 50524 through 50525), and 
the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28001 through 28002) and 
final rule (79 FR 49877 through 49878).
    In addition, as discussed previously in the FY 2013 IPPS/LTCH PPS 
final rule (77 FR 53324), the 5010 format allows the reporting and, 
effective January 1, 2011, the processing of up to 25 diagnoses and 25 
procedure codes. As such, it is necessary to report a valid POA 
indicator for each diagnosis code, including the principal diagnosis 
and all secondary diagnoses up to 25.
4. HACs and POA Reporting in Preparation for Transition to ICD-10-CM 
and ICD-10-PCS
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51506 and 51507), in 
preparation for the transition to the ICD-10-CM and ICD-10-PCS code 
sets, we indicated that further information regarding the use of the 
POA indicator with the ICD-10-CM/ICD-10-PCS classifications as they 
pertain to the HAC policy would be discussed in future rulemaking.
    At the March 5, 2012 and the September 19, 2012 meetings of the 
ICD-9-CM Coordination and Maintenance Committee, an announcement was 
made with regard to the availability of the ICD-9-CM HAC list 
translation to ICD-10-CM and ICD-10-PCS code sets. Participants were 
informed that the list of the ICD-9-CM selected HACs had been 
translated into codes using the ICD-10-CM and ICD-10-PCS classification 
system. It was recommended that the public review this list of ICD-10-
CM/ICD-10-PCS code translations of the selected HACs available on the 
CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We encouraged the public to submit 
comments on these translations through the HACs Web page using the CMS 
ICD-10-CM/PCS HAC Translation Feedback Mailbox that was set up for this 
purpose under the Related Links section titled ``CMS HAC Feedback.'' We 
also encouraged readers to review the educational materials and draft 
code sets available for ICD-10-CM/PCS on the CMS Web site at: http://www.cms.gov/ICD10/. Lastly, we provided information regarding the ICD-
10 MS-DRG Conversion Project on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/icd10_hacs.html.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50525), we stated 
that the final HAC list translation from ICD-9-CM to ICD-10-CM/ICD-10-
PCS would be subject to formal rulemaking. We again encouraged readers 
to review the educational materials and updated draft code sets 
available for ICD-10-CM/ICD-10-PCS on the CMS Web site at: http://www.cms.gov/ICD10/. In addition, we stated that the draft ICD-10-CM 
Coding Guidelines could be viewed on the CDC Web site at: http://www.cdc.gov/nchs/icd/icd10cm.htm.
    However, prior to engaging in rulemaking for the FY 2015 HAC 
program, on April 1, 2014, the Protecting Access to Medicare Act of 
2014 (PAMA) (Pub. L. 113-93) was enacted, which specified that the 
Secretary may not adopt ICD-10 prior to October 1, 2015. Accordingly, 
the U.S. Department of Health and Human Services released a final rule 
in the Federal Register on August 4, 2014 (79 FR 45128 through 45134) 
that included a new compliance date that requires the use of ICD-10 
beginning October 1, 2015. The August 4, 2014 final rule is available 
for viewing on the Internet at: http://www.gpo.gov/fdsys/pkg/FR-2014-08-04/pdf/2014-18347.pdf. That final rule also requires HIPAA covered 
entities to continue to use ICD-9-CM through September 30, 2015. 
Further information of the ICD-10 rules can be found on the Web site 
at: http://www.cms.gov/Medicare/Coding/ICD10/Statute_Regulations.html.
    As described in section II.F.5. of the preamble of this proposed 
rule, we are proposing the HAC list translation from ICD-9-CM to ICD-
10-CM/ICD-10-PCS in this FY 2016 IPPS/LTCH PPS proposed rule.
5. Proposed Changes to the HAC Program for FY 2016
    As discussed in section II.G. 1. a. of the preamble of this 
proposed rule, for FY 2016, we are proposing the ICD-10 MS-DRGs Version 
33 as the replacement logic for the ICD-9-CM MS-DRGs Version 32. As 
part of our DRA HAC update for FY 2016, we are proposing that the ICD-
10-CM/PCS Version 33 HAC list replace the ICD-9-CM Version 32 HAC list. 
We are soliciting public comments on how well the ICD-10-CM/PCS Version 
32 HAC list replicates the ICD-9-CM Version 32 HAC list.
    CMS prepared the ICD-10 MS-DRGs Version 32 based on the FY 2015 MS-
DRGs (Version 32) that we finalized in the FY 2015 IPPS/LTCH PPS final 
rule. In November 2014, we posted a Definitions Manual of the ICD-10 
MS-DRGs Version 32 on the ICD-10 MS-DRG Conversion Project Web site at: 
http://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. The HAC code list translations from ICD-9-CM to ICD-10-
CM/PCS are located in Appendix I of the ICD-10-CM/PCS MS-DRG Version 32 
Definitions Manual. The link to this Manual (available in both text and 
HTML formats) is located in the Downloads section of the ICD-10 MS-DRG 
Conversion Project Web site.
    With respect to the current categories of the HACs, we are not 
proposing to add or remove any categories in this FY 2016 IPPS/LTCH PPS 
proposed rule. However, as described more fully in section III.F.7, of 
the preamble of this proposed rule, we will continue to monitor 
contemporary evidence-based guidelines for selected, candidate, and 
previously considered HACs that provide specific recommendations for 
the prevention of the corresponding conditions in the acute hospital 
setting and may use this information to inform future rulemaking. We 
also continue to encourage public dialogue about refinements to the HAC 
list through written stakeholder comments. We refer readers to section 
II.F.6. of the FY 2008 IPPS final rule with comment period (72 FR 47202 
through 47218) and to section II.F.7. of the FY 2009 IPPS final rule 
(73 FR 48774 through 48491) for detailed discussion supporting our 
determination regarding each of the current conditions. We also refer 
readers to the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27892 through 
27898) and final rule (77 FR 53285 through 53292) for the HAC policy 
for FY 2013, the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27509 
through 27512) and final rule (78 FR 50523

[[Page 24349]]

through 50527) for the HAC policy for FY 2014, and the FY 2015 IPPS/
LTCH PPS proposed rule (79 FR 28000 through 28003) and final rule (79 
FR 49876 through 49880) for the HAC policy for FY 2015.
    In summary, we are proposing that the ICD-10-CM/PCS Version 33 HAC 
list replace the ICD-9-CM Version 32 HAC list and are seeking public 
comments on how well the ICD-10-CM/PCS Version 32 HAC list replicates 
the ICD-9-CM Version 32 HAC list.
6. RTI Program Evaluation
    On September 30, 2009, a contract was awarded to RTI to evaluate 
the impact of the Hospital-Acquired Condition-Present on Admission 
(HAC-POA) provisions on the changes in the incidence of selected 
conditions, effects on Medicare payments, impacts on coding accuracy, 
unintended consequences, and infection and event rates. This was an 
intra-agency project with funding and technical support from CMS, OPHS, 
AHRQ, and CDC. The evaluation also examined the implementation of the 
program and evaluated additional conditions for future selection. The 
contract with RTI ended on November 30, 2012. Summary reports of RTI's 
analysis of the FYs 2009, 2010, and 2011 MedPAR data files for the HAC-
POA program evaluation were included in the FY 2011 IPPS/LTCH PPS final 
rule (75 FR 50085 through 50101), the FY 2012 IPPS/LTCH PPS final rule 
(76 FR 51512 through 51522), and the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53292 through 53302). Summary and detailed data also were made 
publicly available on the CMS Web site at: http://www.cms.gov/HospitalAcqCond/01_Overview.asp and the RTI Web site at: http://www.rti.org/reports/cms/.
    In addition to the evaluation of HAC and POA MedPAR claims data, 
RTI also conducted analyses on readmissions due to HACs, the 
incremental costs of HACs to the health care system, a study of 
spillover effects and unintended consequences, as well as an updated 
analysis of the evidence-based guidelines for selected and previously 
considered HACs. Reports on these analyses have been made publicly 
available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/index.html.
7. RTI Reports on Evidence-Based Guidelines
    The RTI program evaluation included a report that provided 
references for all evidence-based guidelines available for each of the 
selected, candidate, and previously considered HACs that provided 
specific recommendations for the prevention of the corresponding 
conditions. Guidelines were primarily identified using the AHRQ 
National Guidelines Clearing House (NGCH) and the CDC, along with 
relevant professional societies. Guidelines published in the United 
States were used, if available. In the absence of U.S. guidelines for a 
specific condition, international guidelines were included.
    RTI prepared a final report to summarize its findings regarding 
these guidelines. This report is titled ``Evidence-Based Guidelines for 
Selected, Candidate, and Previously Considered Hospital-Acquired 
Conditions'' and can be found on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/Downloads/Evidence-Based-Guidelines.pdf.
    Subsequent to this final report, RTI was awarded a new Evidence-
Based Guidelines Monitoring contract. Under this monitoring contract, 
RTI annually provides a summary report of the contemporary evidence-
based guidelines for selected, candidate, and previously considered 
HACs that provide specific recommendations for the prevention of the 
corresponding conditions in the acute care hospital setting. We 
received RTI's 2014 report and made it available to the public on the 
CMS Hospital-Acquired Conditions Web page in the ``Downloads'' section 
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalAcqCond/index.html?redirect=/HospitalAcqCond/.
    Once we receive RTI's 2015 report in the late spring or early 
summer, we will make it available to the public at this same link as 
the 2014 report.

G. Proposed Changes to Specific MS-DRG Classifications

1. Discussion of Changes to Coding System and Basis for MS-DRG Updates
a. Conversion of MS-DRGs to the International Classification of 
Diseases, 10th Revision (ICD-10)
    Providers use the code sets under the ICD-9-CM coding system to 
report diagnoses and procedures for Medicare hospital inpatient 
services under the MS-DRG system. A later coding edition, the ICD-10 
coding system, includes the International Classification of Diseases, 
10th Revision, Clinical Modification (ICD-10-CM) for diagnosis coding 
and the International Classification of Diseases, 10th Revision, 
Procedure Coding System (ICD-10-PCS) for inpatient hospital procedure 
coding, as well as the Official ICD-10-CM and ICD-10-PCS Guidelines for 
Coding and Reporting. The ICD-10 coding system was initially adopted 
for transactions conducted on or after October 1, 2013, as described in 
the Health Insurance Portability and Accountability Act of 1996 (HIPAA) 
Administrative Simplification: Modifications to Medical Data Code Set 
Standards to Adopt ICD-10-CM and ICD-10-PCS Final Rule published in the 
Federal Register on January 16, 2009 (74 FR 3328 through 3362) 
(hereinafter referred to as the ``ICD-10-CM and ICD-10-PCS final 
rule''). However, the Secretary of Health and Human Services issued a 
final rule that delayed the compliance date for ICD-10 from October 1, 
2013, to October 1, 2014. That final rule, entitled ``Administrative 
Simplification: Adoption of a Standard for a Unique Health Plan 
Identifier; Addition to the National Provider Identifier Requirements; 
and a Change to the Compliance Date for ICD-10-CM and ICD-10-PCS 
Medical Data Code Sets,'' CMS-0040-F, was published in the Federal 
Register on September 5, 2012 (77 FR 54664) and is available for 
viewing on the Internet at: http://www.gpo.gov/fdsys/pkg/FR-2012-09-05/pdf/2012-21238.pdf. On April 1, 2014, the Protecting Access to Medicare 
Act of 2014 (PAMA) (Pub. L. 113-93) was enacted, which specified that 
the Secretary may not adopt ICD-10 prior to October 1, 2015. 
Accordingly, the U.S. Department of Health and Human Services released 
a final rule in the Federal Register on August 4, 2014 (79 FR 45128 
through 45134) that included a new compliance date that requires the 
use of ICD-10 beginning October 1, 2015. The August 4, 2014 final rule 
is available for viewing on the Internet at: http://www.gpo.gov/fdsys/pkg/FR-2014-08-04/pdf/2014-18347.pdf. That final rule also requires 
HIPAA covered entities to continue to use ICD-9-CM through September 
30, 2015.
    The anticipated move to ICD-10 necessitated the development of an 
ICD-10-CM/ICD-10-PCS version of the MS-DRGs. CMS began a project to 
convert the ICD-9-CM-based MS-DRGs to ICD-10 MS-DRGs. In response to 
the FY 2011 IPPS/LTCH PPS proposed rule, we received public comments on 
the creation of the ICD-10 version of the MS-DRGs, which will be 
implemented at the same time as ICD-10 (75 FR 50127 and 50128). While 
we did not propose an ICD-10 version of the MS-DRGs in the FY 2011 
IPPS/LTCH PPS proposed rule, we noted that we have been actively 
involved in converting current MS-DRGs from ICD-9-CM codes to ICD-10 
codes and sharing this

[[Page 24350]]

information through the ICD-10 (previously ICD-9-CM) Coordination and 
Maintenance Committee. We undertook this early conversion project to 
assist other payers and providers in understanding how to implement 
their own conversion projects. We posted ICD-10 MS-DRGs based on 
Version 26.0 (FY 2009) of the MS-DRGs. We also posted a paper that 
describes how CMS went about completing this project and suggestions 
for other payers and providers to follow. Information on the ICD-10 MS-
DRG conversion project can be found on the ICD-10 MS-DRG Conversion 
Project Web site at: http://www.cms.hhs.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We have continued to keep the public 
updated on our maintenance efforts for ICD-10-CM and ICD-10-PCS coding 
systems, as well as the General Equivalence Mappings that assist in 
conversion through the ICD-10 (previously ICD-9-CM) Coordination and 
Maintenance Committee. Information on these committee meetings can be 
found on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html.
    During FY 2011, we developed and posted Version 28 of the ICD-10 
MS-DRGs based on the FY 2011 MS-DRGs (Version 28) that we finalized in 
the FY 2011 IPPS/LTCH PPS final rule on the CMS Web site. This ICD-10 
MS-DRGs Version 28 also included the CC Exclusion List and the ICD-10 
version of the hospital-acquired conditions (HACs), which was not 
posted with Version 26. We also discussed this update at the September 
15-16, 2010 and the March 9-10, 2011 meetings of the ICD-9-CM 
Coordination and Maintenance Committee. The minutes of these two 
meetings are posted on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html.
    We reviewed public comments on the ICD-10 MS-DRGs Version 28 and 
made updates as a result of these comments. We called the updated 
version the ICD-10 MS-DRGs Version 28-R1. We posted a Definitions 
Manual of ICD-10 MS-DRGs Version 28-R1 on our ICD-10 MS-DRG Conversion 
Project Web site. To make the review of Version 28-R1 updates easier 
for the public, we also made available pilot software on a CD-ROM that 
could be ordered through the National Technical Information Service 
(NTIS). A link to the NTIS ordering page was provided on the CMS ICD-10 
MS-DRGs Web page. We stated that we believed that, by providing the 
ICD-10 MS-DRGs Version 28-R1 Pilot Software (distributed on CD-ROM), 
the public would be able to more easily review and provide feedback on 
updates to the ICD-10 MS-DRGs. We discussed the updated ICD-10 MS-DRGs 
Version 28-R1 at the September 14, 2011 ICD-9-CM Coordination and 
Maintenance Committee meeting. We encouraged the public to continue to 
review and provide comments on the ICD-10 MS-DRGs so that CMS could 
continue to update the system.
    In FY 2012, we prepared the ICD-10 MS-DRGs Version 29, based on the 
FY 2012 MS-DRGs (Version 29) that we finalized in the FY 2012 IPPS/LTCH 
PPS final rule. We posted a Definitions Manual of ICD-10 MS-DRGs 
Version 29 on our ICD-10 MS-DRG Conversion Project Web site. We also 
prepared a document that describes changes made from Version 28 to 
Version 29 to facilitate a review. The ICD-10 MS-DRGs Version 29 was 
discussed at the ICD-9-CM Coordination and Maintenance Committee 
meeting on March 5, 2012. Information was provided on the types of 
updates made. Once again, the public was encouraged to review and 
comment on the most recent update to the ICD-10 MS-DRGs.
    CMS prepared the ICD-10 MS-DRGs Version 30 based on the FY 2013 MS-
DRGs (Version 30) that we finalized in the FY 2013 IPPS/LTCH PPS final 
rule. We posted a Definitions Manual of the ICD-10 MS-DRGs Version 30 
on our ICD-10 MS-DRG Conversion Project Web site. We also prepared a 
document that describes changes made from Version 29 to Version 30 to 
facilitate a review. We produced mainframe and computer software for 
Version 30, which was made available to the public in February 2013. 
Information on ordering the mainframe and computer software through 
NTIS was posted on the ICD-10 MS-DRG Conversion Project Web site. The 
ICD-10 MS-DRGs Version 30 computer software facilitated additional 
review of the ICD-10 MS-DRGs conversion.
    We provided information on a study conducted on the impact of 
converting MS-DRGs to ICD-10. Information on this study is summarized 
in a paper entitled ``Impact of the Transition to ICD-10 on Medicare 
Inpatient Hospital Payments.'' This paper was posted on the CMS ICD-10 
MS-DRGs Conversion Project Web site and was distributed and discussed 
at the September 15, 2010 ICD-9-CM Coordination and Maintenance 
Committee meeting. The paper described CMS' approach to the conversion 
of the MS-DRGs from ICD-9-CM codes to ICD-10 codes. The study was 
undertaken using the ICD-9-CM MS-DRGs Version 27 (FY 2010), which was 
converted to the ICD-10 MS-DRGs Version 27. The study estimated the 
impact on aggregate payment to hospitals and the distribution of 
payments across hospitals. The impact of the conversion from ICD-9-CM 
to ICD-10 on Medicare MS-DRG hospital payments was estimated using FY 
2009 Medicare claims data. The study found a hospital payment increase 
of 0.05 percent using the ICD-10 MS-DRGs Version 27.
    CMS provided an overview of this hospital payment impact study at 
the March 5, 2012 ICD-9-CM Coordination and Maintenance Committee 
meeting. This presentation followed presentations on the creation of 
ICD-10 MS-DRGs Version 29. A summary report of this meeting can be 
found on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html. At the March 2012 meeting, CMS 
announced that it would produce an update on this impact study based on 
an updated version of the ICD-10 MS-DRGs. This update of the impact 
study was presented at the March 5, 2013 ICD-9-CM Coordination and 
Maintenance Committee meeting. The study found that moving from an ICD-
9-CM-based system to an ICD-10 MS-DRG replicated system would lead to 
DRG reassignments on only 1 percent of the 10 million MedPAR sample 
records used in the study. Ninety-nine percent of the records did not 
shift to another MS-DRG when using an ICD-10 MS-DRG system. For the 1 
percent of the records that shifted, 45 percent of the shifts were to a 
higher weighted MS-DRG, while 55 percent of the shifts were to lower 
weighted MS-DRGs. The net impact across all MS-DRGs was a reduction by 
4/10000 or minus 4 pennies per $100. The updated paper is posted on the 
CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Downloads'' section. 
Information on the March 5, 2013 ICD-9-CM Coordination and Maintenance 
Committee meeting can be found on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html. This update of the impact paper and the ICD-
10 MS-DRG Version 30 software provided additional information to the 
public who were evaluating the conversion of the MS-DRGs to ICD-10 MS-
DRGs.
    CMS prepared the ICD-10 MS-DRGs Version 31.0 based on the FY 2014 
MS-DRGs (Version 31) that we finalized in the FY 2014 IPPS/LTCH PPS 
final rule. In November 2013, we posted a

[[Page 24351]]

Definitions Manual of the ICD-10 MS-DRGs Version 31 on the ICD-10 MS-
DRG Conversion Project Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also prepared a 
document that described changes made from Version 30 to Version 31 to 
facilitate a review. We produced mainframe and computer software for 
Version 31, which was made available to the public in December 2013. 
Information on ordering the mainframe and computer software through 
NTIS was posted on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Related 
Links'' section. This ICD-10 MS-DRGs Version 31 computer software 
facilitated additional review of the ICD-10 MS-DRGs conversion. We 
encouraged the public to submit to CMS any comments on areas where they 
believed the ICD-10 MS-DRGs did not accurately reflect grouping logic 
found in the ICD-9-CM MS-DRGs Version 31.
    We reviewed public comments received and developed an update of 
ICD-10 MS-DRGs Version 31, which we called ICD-10 MS-DRGs Version 31.0-
R. We made available a Definitions Manual of the ICD-10 MS-DRGs Version 
31.0-R on the ICD-10 MS-DRG Conversion Project Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also prepared a document that describes changes made 
from Version 31 to Version 31-R to facilitate a review. We will 
continue to share ICD-10-MS-DRG conversion activities with the public 
through this Web site.
    CMS prepared the ICD-10 MS-DRGs Version 32 based on the FY 2015 MS-
DRGs (Version 32) that we finalized in the FY 2015 IPPS/LTCH PPS final 
rule. In November 2014, we made available a Definitions Manual of the 
ICD-10 MS-DRGs Version 32 on the ICD-10 MS-DRG Conversion Project Web 
site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also prepared a document that described 
changes made from Version 31-R to Version 32 to facilitate a review. We 
produced mainframe and computer software for Version 32, which was made 
available to the public in January 2015. Information on ordering the 
mainframe and computer software through NTIS was made available on the 
CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Related Links'' section. This 
ICD-10 MS-DRGs Version 32 computer software facilitated additional 
review of the ICD-10 MS-DRGs conversion. We encouraged the public to 
submit to CMS any comments on areas where they believed the ICD-10 MS-
DRGs did not accurately reflect grouping logic found in the ICD-9-CM 
MS-DRGs Version 32. We discuss five requests from the public to update 
the ICD-10 MS-DRGs Version 32 to better replicate the ICD-9-CM MS-DRGs 
in section II.G.3., 4., and 5. of the preamble of this proposed rule. 
Therefore, we are proposing to implement the MS-DRG code logic in the 
ICD-10 MS-DRGs Version 32 along with any finalized updates to the ICD-
10 MS-DRGs Version 32 for the final ICD-10 MS-DRGs Version 33. In this 
FY 2016 IPPS/LTCH PPS proposed rule, we are proposing the ICD-10 MS-
DRGs Version 33 as the replacement logic for the ICD-9-CM based MS-DRGs 
Version 32 as part of the proposed MS-DRG updates for FY 2016. We are 
inviting public comments on how well the ICD-10 MS-DRGs Version 32 
replicates the logic of the MS-DRGs Version 32 based on ICD-9-CM codes.
b. Basis for Proposed FY 2016 MS-DRG Updates
    CMS encourages input from our stakeholders concerning the annual 
IPPS updates when that input is made available to us by December 7 of 
the year prior to the next annual proposed rule update. For example, to 
be considered for any updates or changes in FY 2016, comments and 
suggestions should have been submitted by December 7, 2014. The 
comments that were submitted in a timely manner for FY 2016 are 
discussed below in this section.
    Following are the changes we are proposing to the MS-DRGs for FY 
2016. We are inviting public comment on each of the MS-DRG 
classification proposed changes described below, as well as our 
proposals to maintain certain existing MS-DRG classifications, which 
also are discussed below. In some cases, we are proposing changes to 
the MS-DRG classifications based on our analysis of claims data. In 
other cases, we are proposing to maintain the existing MS-DRG 
classification based on our analysis of claims data. For this FY 2016 
proposed rule, our MS-DRG analysis is based on claims data from the 
December 2014 update of the FY 2014 MedPAR file, which contains 
hospital bills received through September 30, 2014, for discharges 
occurring through September 30, 2014. In our discussion of the proposed 
MS-DRG reclassification changes that follows, we refer to our analysis 
of claims data from the ``December 2014 update of the FY 2014 MedPAR 
file.''
    As explained in previous rulemaking (76 FR 51487), in deciding 
whether to propose to make further modification to the MS-DRGs for 
particular circumstances brought to our attention, we consider whether 
the resource consumption and clinical characteristics of the patients 
with a given set of conditions are significantly different than the 
remaining patients in the MS-DRG. We evaluate patient care costs using 
average costs and lengths of stay and rely on the judgment of our 
clinical advisors to decide whether patients are clinically distinct or 
similar to other patients in the MS-DRG. In evaluating resource costs, 
we consider both the absolute and percentage differences in average 
costs between the cases we select for review and the remainder of cases 
in the MS-DRG. We also consider variation in costs within these groups; 
that is, whether observed average differences are consistent across 
patients or attributable to cases that are extreme in terms of costs or 
length of stay, or both. Further, we consider the number of patients 
who will have a given set of characteristics and generally prefer not 
to create a new MS-DRG unless it would include a substantial number of 
cases.
    In our examination of the claims data, we apply the following 
criteria established in FY 2008 (72 FR 47169) to determine if the 
creation of a new complication or comorbidity (CC) or major 
complication or comorbidity (MCC) subgroup within a base MS-DRG is 
warranted:
     A reduction in variance of costs of at least 3 percent.
     At least 5 percent of the patients in the MS-DRG fall 
within the CC or MCC subgroup.
     At least 500 cases are in the CC or MCC subgroup.
     There is at least a 20-percent difference in average costs 
between subgroups.
     There is a $2,000 difference in average costs between 
subgroups.
    In order to warrant creation of a CC or MCC subgroup within a base 
MS-DRG, the subgroup must meet all five of the criteria.
2. MDC 1 (Diseases and Disorders of the Nervous System): Endovascular 
Embolization (Coiling) Procedures
    We received a request again this year to change the MS-DRG 
assignment for endovascular embolization (coiling) procedures. This 
topic was discussed previously in the FY 2015 IPPS/LTCH PPS proposed 
rule (79 FR 28005 through 28006) and in the FY 2015

[[Page 24352]]

IPPS/LTCH PPS final rule (79 FR 49883 through 49886). For FY 2015, we 
did not change the MS-DRG assignment for endovascular embolization 
(coiling) procedures.
    After issuance of the FY 2015 IPPS/LTCH PPS final rule, we received 
a modified request from the commenter asking that CMS consider 
establishing four new MS-DRGs:
     Recommended MS-DRG XXX (Endovascular Intracranial 
Embolization Procedures with Principal Diagnosis of Hemorrhage);
     Recommended MS-DRG XXX (Endovascular Intracranial 
Embolization Procedures without Principal Diagnosis of Hemorrhage with 
MCC);
     Recommended MS-DRG XXX (Endovascular Intracranial 
Embolization Procedures without Principal Diagnosis of Hemorrhage with 
CC); and
     Recommended MS-DRG XXX (Endovascular Intracranial 
Embolization Procedures without Principal Diagnosis of Hemorrhage 
without CC/MCC).
    The requestor stated that these new suggested MS-DRGs will promote 
clinical cohesiveness and resource comparability. The requestor stated 
that endovascular intracranial and endovascular embolization procedures 
are not similar to the open craniotomy procedures with which they are 
currently grouped. The requestor asserted that the differences in costs 
between endovascular intracranial procedures and open craniotomy 
procedures are great, reflecting, for instance, the use of an operating 
suite versus interventional vascular catheterization lab suite, 
intensive care and other costs.
    In conjunction with the recommended new MS-DRGs, the requestor 
recommended that the following ICD-9-CM codes, which include 
endovascular embolization procedures and additional intracranial 
procedures, be removed from MS-DRG 020 (Intracranial Vascular 
Procedures with Principal Diagnosis of Hemorrhage with MCC); MS-DRG 021 
(Intracranial Vascular Procedures with Principal Diagnosis of 
Hemorrhage with CC); MS-DRG 022 (Intracranial Vascular Procedures with 
Principal Diagnosis of Hemorrhage without CC/MCC); MS-DRG 023 
(Craniotomy with Major Device Implant/Acute Complex CNS Principal 
Diagnosis with MCC or Chemo Implant); MS-DRG 024 (Craniotomy with Major 
Device Implant/Acute Complex CNS Principal Diagnosis without MCC); MS-
DRG 025 (Craniotomy & Endovascular Intracranial Procedures with MCC); 
MS-DRG 026 (Craniotomy & Endovascular Intracranial Procedures with CC); 
and MS-DRG 027 (Craniotomy & Endovascular Intracranial Procedures 
without CC/MCC):
     00.62 (Percutaneous angioplasty of intracranial vessel);
     39.72 (Endovascular (total) embolization or occlusion of 
head and neck vessels);
     39.74 (Endovascular removal of obstruction from head and 
neck vessel(s));
     39.75 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bare coils);
     39.76 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bioactive coils); and
     39.79 (Other endovascular procedures on other vessels).
    The requestor asked that the four new requested MS-DRGs be created 
using these procedure codes. The requestor suggested that the first 
requested new MS-DRG would be MS-DRG XXX (Endovascular Intracranial 
Embolization Procedures with Principal Diagnosis of Hemorrhage). The 
principal diagnoses for hemorrhage would include the same hemorrhage 
codes in the current MS-DRGs 020, 021, and 022, which are as follows:
     094.87 (Syphilitic ruptured cerebral aneurysm);
     430 (Subarachnoid hemorrhage);
     431 (Intracerebral hemorrhage);
     432.0 (Nontraumatic extradural hemorrhage);
     432.1 (Subdural hemorrhage); and
     432.9 (Unspecified intracranial hemorrhage).
    For this first new requested MS-DRG, the requestor suggested that 
only the following endovascular embolization procedure codes would be 
assigned:
     39.72 (Endovascular (total) embolization or occlusion of 
head and neck vessels);
     39.75 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bare coils); and
     39.76 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bioactive coils).
    The requestor recommended that the three additional new MS-DRGs 
would consist of a new base MS-DRG subdivided into three severity 
levels as follows:
     Recommended MS-DRG XXX (Endovascular Intracranial 
Embolization Procedures without Principal Diagnosis of Hemorrhage with 
MCC);
     Recommended MS-DRG XXX (Endovascular Intracranial 
Embolization Procedures without Principal Diagnosis of Hemorrhage with 
CC); and
     Recommended MS-DRG XXX (Endovascular Intracranial 
Embolization Procedures without Principal Diagnosis of Hemorrhage 
without CC/MCC).
    The requestor suggested that these three new recommended MS-DRGs 
would have endovascular embolization procedures as well as additional 
percutaneous and endovascular procedures as listed below:
     00.62 (Percutaneous angioplasty of intracranial vessel);
     39.72 (Endovascular (total) embolization or occlusion of 
head and neck vessels);
     39.74 (Endovascular removal of obstruction from head and 
neck vessel(s));
     39.75 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bare coils);
     39.76 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bioactive coils); and
     39.79 (Other endovascular procedures on other vessels).
    ICD-10-PCS provides the following more detailed codes for 
endovascular embolization, which are assigned to MS-DRGs 020, 021, 022, 
023, 024, 025, 026, and 027 in the ICD-10 MS-DRGs Version 32:

 ICD-10-PCS Codes for Endovascular Embolization Assigned to MS-DRGs 020 Through 027 in ICD-10 MS-DRGs Version 32
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
03LG3BZ.....................................  Occlusion of intracranial artery with bioactive intraluminal
                                               device, percutaneous approach.
03LG3DZ.....................................  Occlusion of intracranial artery with intraluminal device,
                                               percutaneous approach.
03LG4BZ.....................................  Occlusion of intracranial artery with bioactive intraluminal
                                               device, percutaneous endoscopic approach.
03LG4DZ.....................................  Occlusion of intracranial artery with intraluminal device,
                                               percutaneous endoscopic approach.
03LH3BZ.....................................  Occlusion of right common carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03LH3DZ.....................................  Occlusion of right common carotid artery with intraluminal device,
                                               percutaneous approach.
03LH4BZ.....................................  Occlusion of right common carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03LH4DZ.....................................  Occlusion of right common carotid artery with intraluminal device,
                                               percutaneous endoscopic approach.

[[Page 24353]]

 
03LJ3BZ.....................................  Occlusion of left common carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03LJ3DZ.....................................  Occlusion of left common carotid artery with intraluminal device,
                                               percutaneous approach.
03LJ4BZ.....................................  Occlusion of left common carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03LJ4DZ.....................................  Occlusion of left common carotid artery with intraluminal device,
                                               percutaneous endoscopic approach.
03LK3BZ.....................................  Occlusion of right internal carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03LK3DZ.....................................  Occlusion of right internal carotid artery with intraluminal
                                               device, percutaneous approach.
03LK4BZ.....................................  Occlusion of right internal carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03LK4DZ.....................................  Occlusion of right internal carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03LL3BZ.....................................  Occlusion of left internal carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03LL3DZ.....................................  Occlusion of left internal carotid artery with intraluminal
                                               device, percutaneous approach.
03LL4BZ.....................................  Occlusion of left internal carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03LL4DZ.....................................  Occlusion of left internal carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03LM3BZ.....................................  Occlusion of right external carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03LM3DZ.....................................  Occlusion of right external carotid artery with intraluminal
                                               device, percutaneous approach.
03LM4BZ.....................................  Occlusion of right external carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03LM4DZ.....................................  Occlusion of right external carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03LN3BZ.....................................  Occlusion of left external carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03LN3DZ.....................................  Occlusion of left external carotid artery with intraluminal
                                               device, percutaneous approach.
03LN4BZ.....................................  Occlusion of left external carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03LN4DZ.....................................  Occlusion of left external carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03LP3BZ.....................................  Occlusion of right vertebral artery with bioactive intraluminal
                                               device, percutaneous approach.
03LP3DZ.....................................  Occlusion of right vertebral artery with intraluminal device,
                                               percutaneous approach.
03LP4BZ.....................................  Occlusion of right vertebral artery with bioactive intraluminal
                                               device, percutaneous endoscopic approach.
03LP4DZ.....................................  Occlusion of right vertebral artery with intraluminal device,
                                               percutaneous endoscopic approach.
03LQ3BZ.....................................  Occlusion of left vertebral artery with bioactive intraluminal
                                               device, percutaneous approach.
03LQ3DZ.....................................  Occlusion of left vertebral artery with intraluminal device,
                                               percutaneous approach.
03LQ4BZ.....................................  Occlusion of left vertebral artery with bioactive intraluminal
                                               device, percutaneous endoscopic approach.
03LQ4DZ.....................................  Occlusion of left vertebral artery with intraluminal device,
                                               percutaneous endoscopic approach.
03LR3DZ.....................................  Occlusion of face artery with intraluminal device, percutaneous
                                               approach.
03LR4DZ.....................................  Occlusion of face artery with intraluminal device, percutaneous
                                               endoscopic approach.
03LS3DZ.....................................  Occlusion of right temporal artery with intraluminal device,
                                               percutaneous approach.
03LS4DZ.....................................  Occlusion of right temporal artery with intraluminal device,
                                               percutaneous endoscopic approach.
03LT3DZ.....................................  Occlusion of left temporal artery with intraluminal device,
                                               percutaneous approach.
03LT4DZ.....................................  Occlusion of left temporal artery with intraluminal device,
                                               percutaneous endoscopic approach.
03VG3BZ.....................................  Restriction of intracranial artery with bioactive intraluminal
                                               device, percutaneous approach.
03VG3DZ.....................................  Restriction of intracranial artery with intraluminal device,
                                               percutaneous approach.
03VG4BZ.....................................  Restriction of intracranial artery with bioactive intraluminal
                                               device, percutaneous endoscopic approach.
03VG4DZ.....................................  Restriction of intracranial artery with intraluminal device,
                                               percutaneous endoscopic approach.
03VH3BZ.....................................  Restriction of right common carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03VH3DZ.....................................  Restriction of right common carotid artery with intraluminal
                                               device, percutaneous approach.
03VH4BZ.....................................  Restriction of right common carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03VH4DZ.....................................  Restriction of right common carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03VJ3BZ.....................................  Restriction of left common carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03VJ3DZ.....................................  Restriction of left common carotid artery with intraluminal
                                               device, percutaneous approach.
03VJ4BZ.....................................  Restriction of left common carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03VJ4DZ.....................................  Restriction of left common carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03VK3BZ.....................................  Restriction of right internal carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03VK3DZ.....................................  Restriction of right internal carotid artery with intraluminal
                                               device, percutaneous approach.
03VK4BZ.....................................  Restriction of right internal carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03VK4DZ.....................................  Restriction of right internal carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03VL3BZ.....................................  Restriction of left internal carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03VL3DZ.....................................  Restriction of left internal carotid artery with intraluminal
                                               device, percutaneous approach.
03VL4BZ.....................................  Restriction of left internal carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03VL4DZ.....................................  Restriction of left internal carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03VM3BZ.....................................  Restriction of right external carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03VM3DZ.....................................  Restriction of right external carotid artery with intraluminal
                                               device, percutaneous approach.
03VM4BZ.....................................  Restriction of right external carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03VM4DZ.....................................  Restriction of right external carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03VN3BZ.....................................  Restriction of left external carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03VN3DZ.....................................  Restriction of left external carotid artery with intraluminal
                                               device, percutaneous approach.
03VN4BZ.....................................  Restriction of left external carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03VN4DZ.....................................  Restriction of left external carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03VP3BZ.....................................  Restriction of right vertebral artery with bioactive intraluminal
                                               device, percutaneous approach.
03VP3DZ.....................................  Restriction of right vertebral artery with intraluminal device,
                                               percutaneous approach.
03VP4BZ.....................................  Restriction of right vertebral artery with bioactive intraluminal
                                               device, percutaneous endoscopic approach.
03VP4DZ.....................................  Restriction of right vertebral artery with intraluminal device,
                                               percutaneous endoscopic approach.
03VQ3BZ.....................................  Restriction of left vertebral artery with bioactive intraluminal
                                               device, percutaneous approach.
03VQ3DZ.....................................  Restriction of left vertebral artery with intraluminal device,
                                               percutaneous approach.
03VQ4BZ.....................................  Restriction of left vertebral artery with bioactive intraluminal
                                               device, percutaneous endoscopic approach.
03VQ4DZ.....................................  Restriction of left vertebral artery with intraluminal device,
                                               percutaneous endoscopic approach.
03VR3DZ.....................................  Restriction of face artery with intraluminal device, percutaneous
                                               approach.

[[Page 24354]]

 
03VR4DZ.....................................  Restriction of face artery with intraluminal device, percutaneous
                                               endoscopic approach.
03VS3DZ.....................................  Restriction of right temporal artery with intraluminal device,
                                               percutaneous approach.
03VS4DZ.....................................  Restriction of right temporal artery with intraluminal device,
                                               percutaneous endoscopic approach.
03VT3DZ.....................................  Restriction of left temporal artery with intraluminal device,
                                               percutaneous approach.
03VT4DZ.....................................  Restriction of left temporal artery with intraluminal device,
                                               percutaneous endoscopic approach.
03VU3DZ.....................................  Restriction of right thyroid artery with intraluminal device,
                                               percutaneous approach.
03VU4DZ.....................................  Restriction of right thyroid artery with intraluminal device,
                                               percutaneous endoscopic approach.
03VV3DZ.....................................  Restriction of left thyroid artery with intraluminal device,
                                               percutaneous approach.
03VV4DZ.....................................  Restriction of left thyroid artery with intraluminal device,
                                               percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------

    For this FY 2016 IPPS/LTCH PPS proposed rule request, we first 
examined claims data on all intracranial vascular procedure cases with 
a principal diagnosis of hemorrhage reported in MS-DRGs 020, 021, and 
022 from the December 2014 update of the FY 2014 MedPAR file. The table 
below shows our findings. We found a total of 1,755 cases with an 
average length of stay ranging from 8.28 days to 16.84 days and average 
costs ranging from $36,998 to $71,665 in MS-DRGs 020, 021, and 022.

                     Intracranial Vascular Procedures With Principal Diagnosis of Hemorrhage
----------------------------------------------------------------------------------------------------------------
                                                                    Number  of        Average
                             MS-DRG                                    cases      length of stay  Average  costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 020 (with MCC)--All cases................................           1,285           16.84         $71,655
MS-DRG 021 (with CC)--All cases.................................             372           13.82          52,143
MS-DRG 022 (without CC/MCC)--All cases..........................              98            8.28          36,998
----------------------------------------------------------------------------------------------------------------

    Next, we examined claims data on the first part of the request, 
which was to create a new MS-DRG for endovascular intracranial 
embolization procedure cases with a principal diagnosis of hemorrhage 
that are currently reported in MS-DRGs 020, 021, and 022. Our findings 
for the first part of this multi-part request are shown in the table 
below.

            Endovascular Intracranial Embolization Procedures With Principal Diagnosis of Hemorrhage
----------------------------------------------------------------------------------------------------------------
                                                                  Number  of    Average  length
                            MS-DRG                                  cases           of stay       Average  costs
----------------------------------------------------------------------------------------------------------------
Requested New Combined MS-DRG................................           1,275             15.6          $67,831
----------------------------------------------------------------------------------------------------------------

    The requestor suggested that this new requested base MS-DRG would 
not be subdivided by severity levels. Using the requested code logic, 
cases with a principal diagnosis of hemorrhage and procedure codes 
39.72 (Endovascular (total) embolization or occlusion of head and neck 
vessels), 39.75 (Endovascular embolization or occlusion of vessel(s) of 
head or neck using bare coils), and 39.76 (Endovascular embolization or 
occlusion of vessel(s) of head or neck using bioactive coils) would be 
moved out of MS-DRGs 020, 021, and 022 and into a single new MS-DRG 
with no severity levels.
    As can be seen in the table above, the average costs for the new 
requested combined MS-DRG would be $67,831. The average costs for 
current MS-DRGs 020, 021, and 022 were $71,655, $52,143, and $36,998, 
respectively. Based on these findings, if we established this requested 
new MS-DRG, payments for those cases at the highest severity level (MS-
DRG 020, which had average costs of $71,655) would be reduced. We 
believe that maintaining the current MS-DRG assignment for these types 
of procedures is appropriate. Our clinical advisors state that the 
current grouping of procedures within MS-DRGs 020, 021, and 022 
reflects patients who are unique in terms of utilization and complexity 
based on the three severity levels, which are specifically designed to 
capture clinical differences in these patients, and these factors 
support maintaining the current structure. Therefore, we are not 
proposing to move cases with a principal diagnosis of hemorrhage and 
procedure codes 39.72, 39.75, and 39.76 out of MS-DRGs 020, 021, and 
022 and create a new base MS-DRG. We are inviting public comments on 
this proposal.
    As discussed previously, the requestor also recommended the 
creation of a new set of MS-DRGs for endovascular intracranial 
embolization procedures without a principal diagnosis of hemorrhage 
with MCC, with CC, and without CC/MCC. For these new requested MS-DRGs, 
the requestor suggested assignment of endovascular embolization 
procedures as well as certain other percutaneous and endovascular 
procedures. The complete list of endovascular intracranial embolization 
procedures developed by the requestor is as follows:
     00.62 (Percutaneous angioplasty of intracranial vessel);
     39.72 (Endovascular (total) embolization or occlusion of 
head and neck vessels);
     39.74 (Endovascular removal of obstruction from head and 
neck vessel(s));
     39.75 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bare coils);

[[Page 24355]]

     39.76 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bioactive coils); and
     39.79 (Other endovascular procedures on other vessels)
    The following table shows our findings from examination of claims 
data on endovascular intracranial procedures without a principal 
diagnosis of hemorrhage reported in MS-DRGs 023 through 027 from the 
December 2014 update of the FY 2014 MedPAR file.

                 Endovascular Intracranial Procedures Without Principal Diagnosis of Hemorrhage
----------------------------------------------------------------------------------------------------------------
                                                                    Number  of        Average
                             MS-DRG                                    cases      length of stay  Average  costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 023--All cases...........................................           5,615           10.96         $37,784
MS-DRG 023--Cases with endovascular intracranial procedure                 1,510            8.88          39,666
 without diagnosis of hemorrhage................................
MS-DRG 024--All cases...........................................           1,848            5.93          26,195
MS-DRG 024--Cases with endovascular intracranial procedure                   867            5.80          27,975
 without diagnosis of hemorrhage................................
MS-DRG 025--All cases...........................................          16,949            9.35          29,970
MS-DRG 025--Cases with endovascular intracranial procedure                   650            8.52          44,082
 without diagnosis of hemorrhage................................
MS-DRG 026--All cases...........................................           8,075            6.09          21,414
MS-DRG 026--Cases with endovascular intracranial procedure                   778            3.07          26,594
 without diagnosis of hemorrhage................................
MS-DRG 027--All cases...........................................           9,883            3.15          16,613
MS-DRG 027--Cases with endovascular intracranial procedure                 1,793            1.66          22,244
 without diagnosis of hemorrhage................................
----------------------------------------------------------------------------------------------------------------

    As can be seen from this table, if we created a new set of MS-DRGs 
recommended by the requester, most of the cases would have to be moved 
out of MS-DRGs 023 and 027. The 1,510 cases that would have to be moved 
out of MS-DRG 023 have average costs of $39,666 compared to average 
costs of $37,784 for all cases in MS-DRG 023. The average costs for 
these cases are not significantly different from the average costs for 
all cases in MS-DRG 023. The average length of stay for the cases with 
endovascular intracranial procedure without a diagnosis of hemorrhage 
in MS-DRG 023 is 8.88 compared to 10.96 days for all cases in MS-DRG 
023. We believe that these data support the current MS-DRG assignment 
for MS-DRG 023. The 1,793 cases that would have to be moved out of MS-
DRG 027 have average costs of $22,244 compared to the average costs of 
$16,613 for all cases in MS-DRG 027. While the average costs for these 
cases are higher than for all cases in MS-DRG 027, one would expect 
some procedures within an MS-DRG to have higher average costs and other 
procedures to have lower average costs than the overall average costs. 
Cases within the MS-DRGs describing endovascular intracranial 
procedures are grouped together based on similar clinical and resource 
criteria. Some cases will have average costs that are higher than the 
overall average costs for cases in the MS-DRG, while other cases will 
have lower average costs. These differences in average costs are found 
within all MS-DRGs. The average length of stay of MS-DRG 027 cases with 
endovascular intracranial procedure without a diagnosis of hemorrhage 
is 1.66 days as compared to 3.15 days for all cases in MS-DRG 027. 
Therefore, while the average costs are higher for the cases with 
endovascular intracranial procedure without a diagnosis of hemorrhage 
than for all cases in MS-DRG 027, the length of stay is shorter.
    The 867 cases that would have to be moved out of MS-DRG 024 have 
average costs of $27,975 compared to average costs for all cases in MS-
DRG 024 of $26,195. The average costs for these cases are not 
significantly different than the average costs for all cases in MS-DRG 
024. The average length of stay for the 867 cases that would have to be 
moved out of MS-DRG 024 is 5.80 compared to 5.93 for all cases in MS-
DRG 024. Therefore, the lengths of stay for the cases also are quite 
similar in MS-DRG 024. We have determined that these data findings 
support maintaining the current MS-DRG assignment of these procedures 
in MS-DRG 024.
    MS-DRGs 025 and 026 show the smallest number of cases that would 
have to be moved to the requested new MS-DRGs, but these cases have 
larger differences in average costs. The average costs of cases that 
would have to be moved out of MS-DRG 025 are $44,082 compared to 
$29,970 for all cases in MS-DRG 025. The average length of stay for the 
MS-DRG 025 cases with endovascular intracranial procedure without a 
diagnosis of hemorrhage is 8.52 days as compared to 9.35 days for all 
cases in MS-DRG 025. Therefore, the lengths of stay are similar for 
cases in MS-DRG 025. The average costs of cases that would have to be 
moved out of MS-DRG 026 are $26,594 compared to $21,414 for all cases. 
The average length of stay for cases that would have to be moved out of 
MS-DRG 026 is 3.07 days compared to 6.09 days for all cases in MS-DRG 
026, or almost half as long as for all cases in MS-DRG 026. As stated 
earlier, the average costs for cases that would be moved out of MS-DRGs 
023, 024, 025, 026, and 027 under this request are higher than the 
average costs for all cases in these MS-DRGs, with most of the cases 
coming out of MS-DRGs 023 and 027. The average costs for these 
particular cases in MS-DRG 023 are not significantly different from the 
average costs for all cases in MS-DRG 023. In addition, while the 
average costs are higher for the cases with a endovascular intracranial 
procedure without a diagnosis of hemorrhage than for all cases in MS-
DRG 027, the length of stay is shorter. We have determined that the 
overall data do not support making the requested MS-DRG updates to MS-
DRGs 023, 024, 025, 026, and 027 and creating three new MS-DRGs. 
Therefore, we are not proposing to make changes to the current 
structure for MS-DRGs 023 through 027.
    In summary, our clinical advisors reviewed each aspect of this 
multi-part request and advised us that the endovascular embolization 
procedures are appropriately assigned to MS-DRGs 020 through 027. They 
do not support removing the procedures (procedure codes 39.72, 39.75, 
and 39.76) from MS-DRGs 020, 021, and 022 and creating a single MS-DRG 
for endovascular intracranial embolization procedures

[[Page 24356]]

with a principal diagnosis of hemorrhage with no severity levels. Our 
clinical advisors stated that the current MS-DRG grouping of three 
severity levels captures differences in clinical severity, average 
costs, and length of stay for these patients appropriately. Our 
clinical advisors also recommended maintaining the current MS-DRG 
assignments for endovascular embolization and other percutaneous and 
endovascular procedures within MS-DRGs 023 through 027. They stated 
that these procedures are all clinically similar to others in these MS-
DRGs. In addition, they stated that the surgical techniques are all 
designed to correct the same clinical problem, and they advised against 
moving a select number of those procedures out of MS-DRGs 023 through 
027.
    Based on the findings from our data analysis and the 
recommendations from our clinical advisors, we are not proposing to 
create the four new MS-DRGs for endovascular intracranial embolization 
and other endovascular procedures recommended by the requestor. We are 
proposing to maintain the current MS-DRG structure for MS-DRGs 020 
through 027.
    We are inviting public comments on these two proposals.
3. MDC 5 (Diseases and Disorders of the Circulatory System)
a. Adding Severity Levels to MS-DRGs 245 Through 251
    During the comment period for the FY 2015 IPPS/LTCH PPS proposed 
rule, we received a comment that recommended establishing severity 
levels for MS-DRG 245 (AICD Generator Procedures) and including 
additional severity levels for MS-DRG 246 (Percutaneous Cardiovascular 
Procedure with Drug-Eluting Stent with MCC or 4+ Vessels/Stents); MS-
DRG 247 (Percutaneous Cardiovascular Procedure with Drug-Eluting Stent 
without MCC); MS-DRG 248 (Percutaneous Cardiovascular Procedure with 
Non-Drug-Eluting Stent with MCC or 4+ Vessels/Stents); MS-DRG 249 
(Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent 
without MCC); MS-DRG 250 (Percutaneous Cardiovascular Procedure without 
Coronary Artery Stent with MCC); and MS-DRG 251 (Percutaneous 
Cardiovascular Procedure without Coronary Artery Stent without MCC).
    We considered this public comment to be outside of the scope of the 
FY 2015 IPPS/LTCH PPS proposed rule. Therefore, we did not address this 
comment in the FY 2015 IPPS/LTCH PPS final rule. However, we indicated 
that we would consider the public comment for possible proposals in 
future rulemaking as part of our annual review process.
    For this FY 2016 IPPS/LTCH PPS proposed rule, we received a 
separate, but related, request involving most of these same MS-DRGs. 
Therefore, for this proposed rule, we conducted a simultaneous analysis 
of claims data to address both the FY 2015 public comment request and 
the related FY 2016 request. We discuss both of these requests below.
b. Percutaneous Intracardiac Procedures
    We received a request to remove the cardiac ablation and other 
specified cardiovascular procedures from the following MS-DRGs, and to 
create new MS-DRGs to classify these procedures:
     MS-DRG 246 (Percutaneous Cardiovascular Procedure with 
Drug-Eluting Stent with MCC or 4+ Vessels/Stents);
     MS-DRG 247 (Percutaneous Cardiovascular Procedure with 
Drug-Eluting Stent without MCC);
     MS-DRG 248 (Percutaneous Cardiovascular Procedure with 
Non-Drug-Eluting Stent with MCC or 4+ Vessels/Stents);
     MS-DRG 249 (Percutaneous Cardiovascular Procedure with 
Non-Drug-Eluting Stent without MCC);
     MS-DRG 250 (Percutaneous Cardiovascular Procedure without 
Coronary Artery Stent with MCC); and
     MS-DRG 251 (Percutaneous Cardiovascular Procedure without 
Coronary Artery Stent without MCC).
    The commenter stated that, historically, the MS-DRGs listed above 
appropriately reflected the differential cost of percutaneous 
transluminal coronary angioplasty (PTCA) procedures with and without 
stents. The commenter noted that PTCA procedures with drug eluting 
stents were previously paid the highest, followed by PTCA procedures 
with bare metal stents and PTCA procedures with no stents, 
respectively. However, the commenter believed that, in recent years, 
the opposite has begun to occur and cases reporting a PTCA procedure 
without a stent are being paid more than cases reporting a PTCA 
procedure with a stent. The commenter further noted that cardiac 
ablation procedures and PTCA procedures without stents are currently 
assigned to the same MS-DRGs, notwithstanding that the procedures have 
different clinical objectives and patient diagnoses. The commenter 
indicated that cardiac ablation procedures are performed on patients 
with multiple distinct cardiac arrhythmias to alter electrical 
conduction systems of the heart, and PTCA procedures are performed on 
patients with coronary atherosclerosis to open blocked coronary 
arteries. The commenter also noted that cardiac ablation procedures are 
performed in the heart chambers by cardiac electrophysiologists, 
require significantly more resources, and require longer periods of 
time to complete. Conversely, PTCA procedures are performed in the 
coronary vessels by interventional cardiologists, require the use of 
less equipment, and require a shorter period of time to complete. 
Therefore, the commenter suggested that CMS create new MS-DRGs for 
percutaneous intracardiac procedures to help improve clinical 
homogeneity by differentiating percutaneous intracardiac procedures 
(performed within the heart chambers) from percutaneous intracoronary 
procedures (performed within the coronary vessels). The commenter 
further believed that creating new MS-DRGs for these procedures would 
also better reflect the resource cost of specialized equipment used for 
more complex structures of electrical conduction systems when 
performing cardiac ablation procedures.
    The following ICD-9-CM procedure codes identify and describe the 
cardiac ablation procedures and the other percutaneous intracardiac 
procedures that are currently classified under MS-DRGs 246 through 251 
and that the commenter recommended that CMS assign to the newly created 
MS-DRGs:
     35.52 (Repair of atrial septal defect with prosthesis, 
closed technique);
     35.96 (Percutaneous balloon valvuloplasty);
     35.97 (Percutaneous mitral valve repair with implant);
     37.26 (Catheter based invasive electrophysiologic 
testing);
     37.27 (Cardiac mapping);
     37.34 (Excision or destruction of other lesion or tissue 
of heart, endovascular approach);
     37.36 (Excision, destruction, or exclusion of left atrial 
appendage (LAA)); and
     37.90 (Insertion of left atrial appendage device).
    There are a number of ICD-10-PCS code translations that provide 
more detailed and specific information for each of the ICD-9-CM 
procedure codes listed above that also are currently classified under 
MS-DRGs 246 through 251 based on the GROUPER Version 32 ICD-10 MS-DRGs. 
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 
35.52 are shown in the following table.

[[Page 24357]]



                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 35.52
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02U53JZ.....................................  Supplement atrial septum with synthetic substitute, percutaneous
                                               approach.
02U54JZ.....................................  Supplement atrial septum with synthetic substitute, percutaneous
                                               endoscopic approach.
----------------------------------------------------------------------------------------------------------------

    The comparable ICD-10-PCS code translations for ICD-9-CM procedure 
code 35.96 are shown in the following table.

                            ICD-10-PCS Translations for ICD-9-CM Procedure Code 35.96
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
027F34Z.....................................  Dilation of aortic valve with drug-eluting intraluminal device,
                                               percutaneous approach.
027F3DZ.....................................  Dilation of aortic valve with intraluminal device, percutaneous
                                               approach.
027F3ZZ.....................................  Dilation of aortic valve, percutaneous approach.
027F44Z.....................................  Dilation of aortic valve with drug-eluting intraluminal device,
                                               percutaneous endoscopic approach.
027F4DZ.....................................  Dilation of aortic valve with intraluminal device, percutaneous
                                               endoscopic approach.
027F4ZZ.....................................  Dilation of aortic valve, percutaneous endoscopic approach.
027G34Z.....................................  Dilation of mitral valve with drug-eluting intraluminal device,
                                               percutaneous approach.
027G3DZ.....................................  Dilation of mitral valve with intraluminal device, percutaneous
                                               approach.
027G3ZZ.....................................  Dilation of mitral valve, percutaneous approach.
027G44Z.....................................  Dilation of mitral valve with drug-eluting intraluminal device,
                                               percutaneous endoscopic approach.
027G4DZ.....................................  Dilation of mitral valve with intraluminal device, percutaneous
                                               endoscopic approach.
027G4ZZ.....................................  Dilation of mitral valve, percutaneous endoscopic approach.
027H34Z.....................................  Dilation of pulmonary valve with drug-eluting intraluminal device,
                                               percutaneous approach.
027H3DZ.....................................  Dilation of pulmonary valve with intraluminal device, percutaneous
                                               approach.
027H3ZZ.....................................  Dilation of pulmonary valve, percutaneous approach.
027H44Z.....................................  Dilation of pulmonary valve with drug-eluting intraluminal device,
                                               percutaneous endoscopic approach.
027H4DZ.....................................  Dilation of pulmonary valve with intraluminal device, percutaneous
                                               endoscopic approach.
027H4ZZ.....................................  Dilation of pulmonary valve, percutaneous endoscopic approach.
027J34Z.....................................  Dilation of tricuspid valve with drug-eluting intraluminal device,
                                               percutaneous approach.
027J3DZ.....................................  Dilation of tricuspid valve with intraluminal device, percutaneous
                                               approach.
027J3ZZ.....................................  Dilation of tricuspid valve, percutaneous approach.
027J44Z.....................................  Dilation of tricuspid valve with drug-eluting intraluminal device,
                                               percutaneous endoscopic approach.
027J4DZ.....................................  Dilation of tricuspid valve with intraluminal device, percutaneous
                                               endoscopic approach.
027J4ZZ.....................................  Dilation of tricuspid valve, percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------

    The ICD-10-PCS code translation for ICD-9-CM procedure code 35.97 
is 02UG3JZ (Supplement mitral valve with synthetic substitute, 
percutaneous approach.).
    The ICD-10-PCS code translation for ICD-9-CM procedure code 37.26 
is 4A023FZ (Measurement of cardiac rhythm, percutaneous approach.).
    The comparable ICD-10-PCS code translations for ICD-9-CM procedure 
code 37.27 are shown in the following table.

                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.27
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02K83ZZ.....................................  Map conduction mechanism, percutaneous approach.
02K84ZZ.....................................  Map conduction mechanism, percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------

    The comparable ICD-10-PCS code translations for ICD-9-CM procedure 
code 37.34 are shown in the following table:

                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.34
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02553ZZ.....................................  Destruction of atrial septum, percutaneous approach.
02563ZZ.....................................  Destruction of right atrium, percutaneous approach.
02573ZZ.....................................  Destruction of left atrium, percutaneous approach.
02583ZZ.....................................  Destruction of conduction mechanism, percutaneous approach.
02593ZZ.....................................  Destruction of chordae tendineae, percutaneous approach.
025F3ZZ.....................................  Destruction of aortic valve, percutaneous approach.
025G3ZZ.....................................  Destruction of mitral valve, percutaneous approach.
025H3ZZ.....................................  Destruction of pulmonary valve, percutaneous approach.
025J3ZZ.....................................  Destruction of tricuspid valve, percutaneous approach.
025K3ZZ.....................................  Destruction of right ventricle, percutaneous approach.
025L3ZZ.....................................  Destruction of left ventricle, percutaneous approach.

[[Page 24358]]

 
025M3ZZ.....................................  Destruction of ventricular septum, percutaneous approach.
02B53ZZ.....................................  Excision of atrial septum, percutaneous approach.
02B63ZZ.....................................  Excision of right atrium, percutaneous approach.
02B73ZZ.....................................  Excision of left atrium, percutaneous approach.
02B83ZZ.....................................  Excision of conduction mechanism, percutaneous approach.
02B93ZZ.....................................  Excision of chordae tendineae, percutaneous approach.
02BF3ZZ.....................................  Excision of aortic valve, percutaneous approach.
02BG3ZZ.....................................  Excision of mitral valve, percutaneous approach.
02BH3ZZ.....................................  Excision of pulmonary valve, percutaneous approach.
02BJ3ZZ.....................................  Excision of tricuspid valve, percutaneous approach.
02BM3ZZ.....................................  Excision of ventricular septum, percutaneous approach.
02T83ZZ.....................................  Resection of conduction mechanism, percutaneous approach.
----------------------------------------------------------------------------------------------------------------

    The comparable ICD-10-PCS code translations for ICD-9-CM procedure 
code 37.36 are shown in the following table:

                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.36
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02573ZK.....................................  Destruction of left atrial appendage, percutaneous approach.
02574ZK.....................................  Destruction of left atrial appendage, percutaneous endoscopic
                                               approach.
02B73ZK.....................................  Excision of left atrial appendage, percutaneous approach.
02B74ZK.....................................  Excision of left atrial appendage, percutaneous endoscopic
                                               approach.
02L73ZK.....................................  Occlusion of left atrial appendage, percutaneous approach.
02L74ZK.....................................  Occlusion of left atrial appendage, percutaneous endoscopic
                                               approach.
----------------------------------------------------------------------------------------------------------------

    The comparable ICD-10-PCS code translations for ICD-9-CM procedure 
code 37.90 are shown in the following table:

                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.90
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02L73CK.....................................  Occlusion of left atrial appendage with extraluminal device,
                                               percutaneous approach.
02L73DK.....................................  Occlusion of left atrial appendage with intraluminal device,
                                               percutaneous approach.
02L74CK.....................................  Occlusion of left atrial appendage with extraluminal device,
                                               percutaneous endoscopic approach.
02L74DK.....................................  Occlusion of left atrial appendage with intraluminal device,
                                               percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------

    The ICD-10-PCS code translations listed above, along with their 
respective MS-DRG assignments, can be found in the ICD-10 MS-DRGs 
Version 32 Definitions Manual posted on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html.
    As mentioned earlier, we received a separate, but related, request 
to add severity levels to MS-DRGs 246 through 251. We address this 
request at the end of this section.
    To address the first of these separate, but related, requests, we 
reviewed claims data for MS-DRGs 246 through 251 from the December 2014 
update of the FY 2014 MedPAR file. Our findings are shown in the 
following table:

                           Percutaneous Cardiovascular MS-DRGs With and Without Stents
----------------------------------------------------------------------------------------------------------------
                                                                                      Average
                             MS-DRG                                 Number  of       length of    Average  costs
                                                                       cases           stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 246--All cases...........................................          30,617            5.52         $23,855
MS-DRG 246--Cases with procedure codes 35.52, 35.96, 35.97,                  244            9.69         $34.099
 37.26, 37.27, 37.34, 37.36, and 37.90..........................
MS-DRG 247--All cases...........................................          79,639            2.69         $15,671
MS-DRG 247--Cases with procedure codes 35.52, 35.96, 35.97,                  260            5.20         $25,797
 37.26, 37.27, 37.34, 37.36, and 37.90..........................
MS-DRG 248--All cases...........................................           9,310            6.37         $22,504
MS-DRG 248 -Cases with procedure codes 35.52, 35.96, 35.97,                  125           10.76         $33,521
 37.26, 37.27, 37.34, 37.36, and 37.90..........................
MS-DRG 249--All cases...........................................          16,273            3.08         $14,066
MS-DRG 249--Cases with procedure codes 35.52, 35.96, 35.97,                   81            5.12         $23,710
 37.26, 37.27, 37.34, 37.36, and 37.90..........................
MS-DRG 250--All cases...........................................           9,275            7.07         $22,902

[[Page 24359]]

 
MS-DRG 250- Cases with procedure codes 35.52, 35.96, 35.97,                5,826            7.90         $24,841
 37.26, 37.27, 37.34, 37.36, and 37.90..........................
MS-DRG 251--All cases...........................................          20,945            3.25         $15,757
MS-DRG 251--Cases with procedure codes 35.52, 35.96, 35.97,               14,436            3.39         $17,290
 37.26, 37.27, 37.34, 37.36, and 37.90..........................
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, there were a total of 30,617 cases in 
MS-DRG 246, with an average length of stay of 5.52 days and average 
costs of $23,855. For cases reporting a percutaneous intracardiac 
procedure in MS-DRG 246 (ICD-9-CM procedure codes 35.52, 35.96, 35.97, 
37.26, 37.27, 37.34, 37.36, and 37.90), there were a total of 244 
cases, with an average length of stay of 9.69 days and average costs of 
$34,099. For MS-DRGs 247 through 251, a similar pattern was identified; 
the data reflected that the average costs are higher and the average 
length of stay is greater for cases reporting a percutaneous 
intracardiac procedure in comparison to the average costs and average 
length of stay for all of the cases in their respective MS-DRGs.
    As reflected in the following table, a further analysis of the data 
showed that percutaneous intracardiac procedures represent a total of 
20,972 cases in MS-DRGs 246 through 251, with a greater average length 
of stay (4.79 days versus 3.62 days) and higher average costs ($19,810 
versus $17,532) in comparison to all of the remaining cases in MS-DRGs 
246 through 251.

                       Summary of Percutaneous Cardiovascular DRGs With and Without Stents
----------------------------------------------------------------------------------------------------------------
                                                                                      Average
                             MS-DRG                                 Number  of       length of    Average  costs
                                                                       cases           stay
----------------------------------------------------------------------------------------------------------------
MS-DRGs 246 through 251--Cases with procedure codes 35.52,                20,972            4.79         $19,810
 35.96, 35.97, 37.26, 37.27, 37.34, 37.36, and 37.90............
MS-DRGs 246 through 251--Cases without procedure codes 35.52,            145,087            3.62          17,532
 35.96, 35.97, 37.26, 37.27, 37.34, 37.36, and 37.90............
----------------------------------------------------------------------------------------------------------------

    The results of these data analyses support removing procedures 
performed within the heart chambers using intracardiac techniques from 
MS-DRGs 246 through 251, and assigning these procedures to separate MS-
DRGs. The results of these data analyses also support subdividing these 
MS-DRGs using the ``with MCC'' and ``without MCC'' severity levels 
based on the application of the criteria established in the FY 2008 
IPPS final rule (72 FR 47169), and described in section II.G.1.b. of 
the preamble of this proposed rule, that must be met to warrant the 
creation of a CC or an MCC subgroup within a base MS-DRG. Our clinical 
advisors also agree that this differentiation would improve the 
clinical homogeneity of these MS-DRGs by separating percutaneous 
intracardiac procedures (performed within the heart chambers) from 
percutaneous intracoronary procedures (performed within the coronary 
vessels). In addition, we believe that creating these new MS-DRGs would 
better reflect the resource cost of specialized equipment used to 
perform more complex structures of electrical conduction systems during 
cardiac ablation procedures. Therefore, for FY 2016, we are proposing 
to create two new MS-DRGs to classify percutaneous intracardiac 
procedures. Specifically, we are proposing to create MS-DRG 273, 
entitled ``Percutaneous Intracardiac Procedures with MCC,'' and MS-DRG 
274, entitled ``Percutaneous Intracardiac Procedures without MCC,'' and 
to assign the procedures performed within the heart chambers using 
intracardiac techniques to the two proposed new MS-DRGs. We are 
proposing that existing percutaneous intracoronary procedures with and 
without stents continue to be assigned to the other MS-DRGs to reflect 
that those procedures are performed within the coronary vessels and 
require fewer resources.
    The table below represents the distribution of cases, average 
length of stay, and average costs for these proposed two new MS-DRGs.

                          Proposed New MS-DRGs for Percutaneous Intracardiac Procedures
----------------------------------------------------------------------------------------------------------------
                                                                                      Average
                             MS-DRG                                 Number  of       length of    Average  costs
                                                                       cases           stay
----------------------------------------------------------------------------------------------------------------
Proposed MS-DRG 273 with MCC....................................           6,195            8.03         $25,380
Proposed MS-DRG 274 without MCC.................................          14,777            3.44          17,475
----------------------------------------------------------------------------------------------------------------

    We are inviting public comments on our proposal to create the two 
new MS-DRGs for percutaneous intracardiac procedures for FY 2016. In 
addition, we are inviting public comments on the ICD-10-PCS code 
translations that were presented earlier in this section and our 
proposal to assign these procedure codes to the proposed new MS-DRGs 
273 and 274.
    As mentioned earlier in this section, we received a similar request 
in

[[Page 24360]]

response to the FY 2015 IPPS/LTCH PPS proposed rule to add severity 
levels to MS-DRGs 246 through 251. We considered this public comment to 
be outside of the scope of the FY 2015 IPPS/LTCH PPS proposed rule. 
Therefore, we did not address this comment in the FY 2015 IPPS/LTCH PPS 
final rule. However, we indicated that we would consider the public 
comment for possible proposals in future rulemaking as part of our 
annual review process. Specifically, the commenter recommended 
including additional severity levels for MS-DRGs 246 through 251 and 
establishing severity levels for MS-DRG 245 (AICD Generator 
Procedures).
    For our data analysis for this recommendation, we examined claims 
data from the December 2014 update of the FY 2014 MedPAR file to 
determine if including additional severity levels in MS-DRGs 246 
through 251 was warranted. During our analysis, we applied the criteria 
established in the FY 2008 IPPS final rule (72 FR 47169), as described 
in section II.G.1.b. of the preamble of this proposed rule. As shown in 
the table below, we collapsed MS-DRGs 246 through 251 into base MS-DRGs 
(MS-DRGs 246, 248, and 250) by suggested severity level and applied the 
criteria.

----------------------------------------------------------------------------------------------------------------
                                                                                      Average
    Percutaneous cardiovascular MS-DRG with and without stent       Number  of       length of    Average  costs
             procedures  by suggested severity level                   cases           stay
----------------------------------------------------------------------------------------------------------------
Suggested MS-DRG 246 with MCC...................................          30,617            5.52         $23,855
Suggested MS-DRG 246 with CC....................................          45,313            2.96          16,233
Suggested MS-DRG 246 without CC/MCC.............................          34,326            2.33          14,928
Suggested MS-DRG 248 with MCC...................................           9,310            6.37          22,504
Suggested MS-DRG 248 with CC....................................           9,510            3.49          14,798
Suggested MS-DRG 248 without CC/MCC.............................           6,763            2.51          13,037
Suggested MS-DRG 250 with MCC...................................           9,275            7.07          22,903
Suggested MS-DRG 250 with CC....................................          11,653            3.80          16,113
Suggested MS-DRG 250 without CC/MCC.............................           9,292            2.56          15,310
----------------------------------------------------------------------------------------------------------------

    We found that the criterion that there be a $2,000 difference in 
average costs between subgroups was not met. Specifically, between the 
``with CC'' and ``without CC/MCC'' subgroups for base MS-DRG 246, the 
difference in average costs was only $1,305; for base MS-DRG 248, the 
difference in average costs was only $1,761; and for base MS-DRG 250, 
the difference in average costs was only $803. The results of the data 
analysis of MS-DRGs 246 through 251 confirmed, and our clinical 
advisors agreed, that the existing 2-way severity level splits for 
these MS-DRGs (with MCC and without MCC) are appropriate, as displayed 
in the table below.

                           Percutaneous Cardiovascular MS-DRGs With and Without Stents
----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
                             MS-DRG                                    cases      length of stay  Average  costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 246--All cases...........................................          30,617            5.52         $23,855
MS-DRG 247--All cases...........................................          79,639            2.69          15,671
MS-DRG 248--All cases...........................................           9,310            6.37          22,504
MS-DRG 249--All cases...........................................          16,273            3.08          14,066
MS-DRG 250--All cases...........................................           9,275            7.07          22,903
MS-DRG 251--All cases...........................................          20,945            3.25          15,757
----------------------------------------------------------------------------------------------------------------

    Therefore, we are not proposing to further subdivide the severity 
levels for MS-DRGs 246 through 251. We are inviting public comments on 
our proposal not to create additional severity levels for MS-DRGs 246 
through 251.
    Using the same MedPAR claims data for FY 2014, we separately 
examined cases in MS-DRG 245 to determine whether to subdivide this MS-
DRG into severity levels. As displayed in the table below, the results 
of the FY 2014 data analysis showed there were a total of 1,699 cases, 
with an average length of stay of 5.49 days and average costs of 
$34,287, in MS-DRG 245.

                                            AICD Generator Procedures
----------------------------------------------------------------------------------------------------------------
                                                                  Number of     Average  length
                            MS-DRG                                  cases           of stay       Average  costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 245--All cases........................................           1,699             5.49          $34,287
----------------------------------------------------------------------------------------------------------------

    We applied the five criteria established in the FY 2008 IPPS final 
rule (72 FR 47169), as described in section II.G.1.b. of the preamble 
of this proposed rule, to determine if it was appropriate to subdivide 
MS-DRG 245 into severity levels. The table below illustrates our 
findings.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
      AICD generator procedures by suggested severity level            cases      length of stay  Average  costs
----------------------------------------------------------------------------------------------------------------
Suggested MS-DRG 245 with MCC...................................             542            8.15         $40,004

[[Page 24361]]

 
Suggested MS-DRG 245 with CC....................................             939            4.51          32,237
Suggested MS-DRG 245 without CC/MCC.............................             218            3.12          28,907
----------------------------------------------------------------------------------------------------------------

    Based on the analysis of the FY 2014 claims data for MS-DRG 245, 
the results support creating a ``with MCC'' and a ``without MCC'' 
severity level split. Our clinical advisors indicated that it would not 
be clinically appropriate to add severity levels based on an isolated 
year's data fluctuation because this could lead to a lack of stability 
in MS-DRG payments. We agree with our clinical advisors and note that 
we annually conduct an analysis of base MS-DRGs to evaluate if 
additional severity levels are warranted. This analysis includes 2 
years of MedPAR claims data to specifically compare data results from 1 
year to the next to avoid making determinations about whether 
additional severity levels are warranted based on an isolated year's 
data fluctuation. Generally, in past years, for our review of requests 
to add or establish severity levels, in our analysis of the most recent 
claims data, there was at least one criterion that was not met. 
Therefore, it was not necessary to further analyze data beyond 1 year. 
However, the results of our analysis of claims data in the December 
2014 update of the FY 2014 MedPAR file for this particular request 
involving MS-DRG 245 demonstrate that all five criteria to establish 
subgroups were met, and, therefore, it was necessary to also examine 
the FY 2013 MedPAR claims data file.
    The results of our analysis from the December 2013 update of the FY 
2013 claims data for MS-DRG 245 are shown in the table below.

                                            AICD Generator Procedures
----------------------------------------------------------------------------------------------------------------
                                                                  Number of     Average  length
                            MS-DRG                                  cases           of stay       Average  costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 245--All cases........................................           1,850             4.81          $33,272
----------------------------------------------------------------------------------------------------------------

    The FY 2013 claims data for MS-DRG 245 do not support creating any 
severity levels because the data did not meet one or more of the five 
required criteria for creating new severity levels. The data did not 
meet the requirement for a 3-way severity level split (with MCC, with 
CC, and without CC/MCC) or a 2-way severity level split (with MCC and 
without MCC) because there were not at least 500 cases in the MCC 
subgroup. While the data did meet this particular criterion for the 2-
way severity level split of ``with CC/MCC'' and ``without CC/MCC'' 
because there were at least 500 cases in the CC subgroup, the data did 
not meet the criterion that there be at least a 20-percent difference 
in average costs between subgroups, as shown in the table below.

                                            AICD Generator Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
               MS-DRG by suggested severity level                      cases      length of stay  Average  costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 245 with MCC.............................................              44            7.32         $39,536
MS-DRG 245 with CC..............................................           1,118            4.26          31,786
MS-DRG 245 without CC/MCC.......................................             288            3.10          29,383
----------------------------------------------------------------------------------------------------------------

    As stated previously, we believe that 2 years of data showing that 
the requested CC or MCC subgroup meets all five of the established 
criteria for creating severity levels are needed in order to support a 
proposal to add severity levels for MS-DRG 245. Our clinical advisors 
also agree that it would not be clinically appropriate to add severity 
levels based on an isolated year's data fluctuation because this could 
lead to a lack of stability in payments. Therefore, we are not 
proposing to add severity levels for MS-DRG 245 for FY 2016. We are 
inviting public comments on the results of our analysis and our 
proposal not to create severity levels for MS-DRG 245.
c. Zilver[supreg] PTX Drug-Eluting Peripheral Stent (Zilver[supreg] 
PTX[supreg])
    Zilver[supreg] PTX Drug-Eluting Peripheral Stent (Zilver[supreg] 
PTX[supreg]) was approved for new technology add-on payments in FY 2014 
(78 FR 50583 through 50585). Cases involving the Zilver[supreg] 
PTX[supreg] that are eligible for new technology add-on payments are 
identified by ICD-9-CM procedure code 00.60 (Insertion of drug-eluting 
stent(s) of superficial femoral artery).
    We received a request from the manufacturer for an extension of new 
technology add-on payments for Zilver[supreg] PTX[supreg] in FY 2016. 
In the request, the manufacturer asked CMS to consider three options 
for procedure code 00.60 for FY 2016. The first option was to extend 
the new technology add-on payment through FY 2016. The request to 
extend the new technology add-on payment is addressed in section 
II.I.3.e. of the preamble of this proposed rule. The second option was 
to establish a new family of MS-DRGs for drug-eluting stents used in 
the peripheral (noncoronary) vasculature. The third option was to 
assign all Zilver[supreg] PTX[supreg] cases to MS-DRG 252 even if there 
is no MCC (which would necessitate revising the MS-DRG title to ``Other 
Vascular Procedures).
    ICD-10-PCS provides the following more detailed procedure codes for 
the insertion of drug-eluting stents of superficial femoral artery:
     047K04Z (Dilation of right femoral artery with drug-
eluting intraluminal device, open approach);

[[Page 24362]]

     047K34Z (Dilation of right femoral artery with drug-
eluting intraluminal device, percutaneous approach);
     047K44Z (Dilation of right femoral artery with drug-
eluting intraluminal device, percutaneous endoscopic approach);
     047L04Z (Dilation of left femoral artery with drug-eluting 
intraluminal device, open approach);
     047L34Z (Dilation of left femoral artery with drug-eluting 
intraluminal device, percutaneous approach); and
     047L44Z (Dilation of left femoral artery with drug-eluting 
intraluminal device, percutaneous endoscopic approach).
    We examined claims data for the drug-eluting peripheral stent 
procedures cases reported in the December 2014 update of the FY 2014 
MedPAR file for MS-DRGs 252, 253, and 254 (Other Vascular Procedures 
with MCC, with CC and without CC/MCC, respectively). The following 
table illustrates our findings.

                                    Drug-Eluting Peripheral Stent Procedures
----------------------------------------------------------------------------------------------------------------
                                                                     Number of    Average length
                             MS-DRGs                                   cases          of stay      Average costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 252--All cases...........................................          30,696            7.89         $23,935
MS-DRG 252--Cases with procedure code 00.60.....................             133            9.08          32,623
MS-DRG 253--All cases...........................................          34,746            5.68          19,030
MS-DRG 253--Cases with procedure code 00.60.....................             353            4.99          25,396
MS-DRG 254--All cases...........................................          15,394            2.99          12,629
MS-DRG 254--Cases with procedure code 00.60.....................             115            2.62          21,461
----------------------------------------------------------------------------------------------------------------

    Our findings show that there were only 601 peripheral angioplasty 
cases with a drug-eluting stent reported. Of the 601 peripheral 
angioplasty cases with a drug-eluting stent, 133 cases were in MS-DRG 
252, 353 cases were in MS-DRG 253, and 115 cases were in MS-DRG 254. 
The average costs for the drug-eluting stent cases in MS-DRGs 252, 253, 
and 254 were $32,623, $25,396, and $21,461, respectively. The average 
costs for all cases in MS-DRGs 252, 253, and 254 were $23,935, $19,030, 
and $12,629, respectively. The average costs for the drug-eluting stent 
cases in MS-DRG 253 ($25,396) were higher than the average costs for 
all cases in MS-DRG 252 ($23,935). However, the average costs for the 
drug-eluting stent cases in MS-DRG 254 ($21,461) were lower than the 
average costs for all cases in MS-DRG 252 ($23,935).
    We have determined that the small number of cases (601) does not 
provide justification to create a new set of MS-DRGs specifically for 
angioplasty of peripheral arteries using drug-eluting stents. In 
addition, the data do not support assigning all the drug-eluting stent 
cases to the highest severity level (MS-DRG 252), even when there is 
not an MCC, because the average costs for the drug-eluting stent cases 
in MS-DRG 254 ($21,461) were lower than the average costs for all cases 
in MS-DRG 252 ($23,935). The average length of stay for drug-eluting 
stent cases in MS-DRG 254 was 2.62 days compared to 7.89 days for all 
cases in MS-DRG 252. Cases are grouped together based on similar 
clinical and resource criteria.
    Our clinical advisors recommended making no MS-DRG updates for 
peripheral angioplasty cases with a drug-eluting stent and considered 
the current MS-DRG assignment appropriate. Our clinical advisors agreed 
that the small number of peripheral angioplasty cases with a drug-
eluting stent does not support creating a new MS-DRG for this specific 
type of treatment. They stated that the cases are clinically similar to 
other cases within MS-DRGs 252, 253, and 254. Considering the data for 
peripheral angioplasty cases with a drug-eluting stent found reported 
in MS-DRGs 252, 253, and 254 and the input from our clinical advisors, 
we are not proposing to make any MS-DRG updates for peripheral 
angioplasty cases with a drug-eluting stent. We are proposing to 
maintain the current MS-DRG assignments for these cases in MS-DRGs 252, 
253, and 254. We are inviting public comments on our proposal.
d. Percutaneous Mitral Valve Repair System--Proposed Revision of ICD-
10-PCS Version 32 Logic
    We received a comment which brought to our attention that the ICD-
10 MS-DRGs Version 32 assignment for ICD-10-PCS procedure code 02UG3JZ 
(Supplement mitral valve with synthetic substitute, percutaneous 
approach) does not accurately replicate the ICD-9-CM MS-DRGs Version 
32, which assign this procedure code to the following MS-DRGs:
     MS-DRG 231 (Coronary Bypass with PTCA with MCC);
     MS-DRG 232 (Coronary Bypass with PTCA without MCC);
     MS-DRG 246 (Percutaneous Cardiovascular Procedure with 
Drug-Eluting Stent with MCC or 4+ Vessels/Stents);
     MS DRG 247 (Percutaneous Cardiovascular Procedure with 
Drug-Eluting Stent without MCC);
     MS-DRG 248 (Percutaneous Cardiovascular Procedure with 
Non-Drug-Eluting Stent with MCC or 4+ Vessels/Stents);
     MS DRG 249 (Percutaneous Cardiovascular Procedure with 
Non-Drug-Eluting Stent without MCC);
     MS-DRG 250 (Percutaneous Cardiovascular Procedure without 
Coronary Artery Stent with MCC); and
     MS-DRG 251 (Percutaneous Cardiovascular Procedure without 
Coronary Artery Stent without MCC).
    We agree with the commenter that the ICD-10 MS-DRGs logic should be 
consistent with the ICD-9 MS-DRGs logic; that is, the ICD-10 MS-DRGs 
Version 32 should replicate the ICD-9-CM MS-DRGs Version 32. Therefore, 
for the proposed FY 2016 ICD-10 MS-DRGs Version 33, we are proposing to 
assign ICD-10-PCS procedure code 02UG3JZ to MS-DRGs 231 and 232 and MS-
DRGs 246 through 251. We are inviting public comments on this proposal.
e. Major Cardiovascular Procedures: Zenith[supreg] Fenestrated 
Abdominal Aortic Aneurysm (AAA) Graft
    The new technology add-on payment for the Zenith[supreg] 
Fenestrated Abdominal Aortic Aneurysm (AAA) Graft (Zenith[supreg] F. 
Graft) will end on September 30, 2015. Cases involving the 
Zenith[supreg] F. Graft are identified by ICD-9-CM procedure code 39.78 
(Endovascular implantation of branching or fenestrated graft(s) in 
aorta) in MS-DRGs 237 and 238 (Major Cardiovascular Procedures with and 
without MCC, respectively). For additional information on the 
Zenith[supreg] F. Graft, we refer readers to the

[[Page 24363]]

FY 2015 IPPS/LTCH PPS final rule (79 FR 49921 through 49922).
    We received a request to reassign procedure code 39.78 to the 
highest severity level in MS-DRGs 237 and 238, including in instances 
when there is not an MCC present, or to create a new MS-DRG that would 
contain all endovascular aneurysm repair procedures. We note that, in 
addition to procedure code 39.78, ICD-9-CM procedure code 39.71 
(Endovascular implantation of other graft in abdominal aorta) also 
describes endovascular aneurysm repair procedures.
    There are a number of ICD-10-PCS code translations that provide 
more detailed and specific information for each of ICD-9-CM codes 39.71 
and 39.78 that also currently group to MS-DRGs 237 and 238 in the ICD-
10 MS-DRGs Version 32. The comparable ICD-10-PCS code translations for 
ICD-9-CM procedure code 39.71 and 39.78 are shown in the following 
tables:

                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.71
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
04U03JZ.....................................  Supplement abdominal aorta with synthetic substitute, percutaneous
                                               approach.
04U04JZ.....................................  Supplement abdominal aorta with synthetic substitute, percutaneous
                                               endoscopic approach.
04V03DZ.....................................  Restriction of abdominal aorta with intraluminal device,
                                               percutaneous approach.
04V04DZ.....................................  Restriction of abdominal aorta with intraluminal device,
                                               percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.78
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
04793DZ.....................................  Dilation of right renal artery with intraluminal device,
                                               percutaneous approach.
04794DZ.....................................  Dilation of right renal artery with intraluminal device,
                                               percutaneous endoscopic approach.
047A3DZ.....................................  Dilation of left renal artery with intraluminal device,
                                               percutaneous approach.
047A4DZ.....................................  Dilation of left renal artery with intraluminal device,
                                               percutaneous endoscopic approach.
04753DZ.....................................  Dilation of superior mesenteric artery with intraluminal device,
                                               percutaneous approach.
04754DZ.....................................  Dilation of superior mesenteric artery with intraluminal device,
                                               percutaneous endoscopic approach.
04V03DZ.....................................  Restriction of abdominal aorta with intraluminal device,
                                               percutaneous approach.
04V04DZ.....................................  Restriction of abdominal aorta with intraluminal device,
                                               percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------

    We analyzed claims data reporting procedure code 39.78 for cases 
assigned to MS-DRGs 237 and 238 in the December 2014 update of the FY 
2014 MedPAR file. We found a total of 18,340 cases, with an average 
length of stay of 9.46 days and average costs of $36,355 in MS-DRG 237. 
We found 332 cases reporting procedure code 39.78, with an average 
length of stay of 8.46 days and average costs of $51,397 in MS-DRG 237. 
For MS-DRG 238, we found a total of 32,227 cases, with an average 
length of stay of 3.72 days and average costs of $25,087. We found 
1,927 cases reporting procedure code 39.78, with an average length of 
stay of 2.52 days and average costs of $31,739 in MS-DRG 238.

                                       Zenith Fenestrated Graft Procedures
----------------------------------------------------------------------------------------------------------------
                                                                    Number  of        Average
                             MS-DRG                                    cases      length of stay  Average  costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 237--All cases...........................................          18,340            9.46         $36,355
MS-DRG 237--Cases with procedure code 39.78.....................             332            8.46          51,397
MS-DRG 238--All cases...........................................          32,227            3.72          25,087
MS-DRG 238--Cases with procedure code 39.78.....................           1,927            2.52          31,739
----------------------------------------------------------------------------------------------------------------

    As illustrated in the table above, the results of the data analysis 
indicate that the average costs for cases reporting procedure code 
39.78 assigned to MS-DRG 238 were higher than the average costs for all 
cases in MS-DRG 238 ($3l,739 compared to $25,087). In addition, the 
average costs for the 1,927 cases reporting procedure code 39.78 
assigned to MS-DRG 238 were $4,616 less than the costs of all cases 
assigned to MS-DRG 237. We determined that moving cases reporting 
procedure code 39.78 from MS-DRG 238 to MS-DRG 237 would result in 
overpayments. We also note that the average length of stay for the 
1,927 cases reporting procedure code 39.78 in MS-DRG 238 was 2.52 days 
in comparison to the average length of stay for all cases in MS-DRG 237 
of 9.46 days. Our clinical advisors do not agree with moving cases 
reporting procedure code 39.78 to a higher severity level (with MCC) 
MS-DRG.
    We believe that the higher average costs could be attributed to the 
cost of the device. The Zenith[supreg] F. Graft is the only fenestrated 
graft device currently approved by the FDA. Therefore, this 
manufacturer is able to set its own costs in the market. We point out 
that the IPPS is not designed to pay solely for the cost of devices. 
More importantly, moving cases that greatly differ in their severity of 
illness and complexity of resources into a higher severity level MS-
DRG, in the absence of an MCC, would conflict with the objective of the 
MS-DRGs, which is to maintain homogeneous subgroups that are different 
from one another in terms of utilization of resources, that have enough 
volume to be meaningful, and that improve our ability to explain 
variance in resource use (72 FR 47169). Therefore, we are not proposing 
to reassign all cases reporting procedure code 39.78 from MS-DRG 238 to 
MS-DRG 237, as the commenter requested.
    However, we recognize that the results of the data analysis also 
demonstrated that the average costs for cases reporting procedure code 
39.78 are higher in both MS-DRG 237 and MS-DRG 238 in comparison to all 
cases in each respective MS-DRG. As these

[[Page 24364]]

higher average costs could be attributable to the cost of the device, 
we note the commenter's concern that the end of the new technology add-
on payment for Zenith[supreg] F. Graft, effective September 30, 2015, 
may result in reduced payment to hospitals and potentially lead to 
issues involving access to care for the subset of beneficiaries who 
would benefit from treatment with the Zenith[supreg] F. Graft. We 
continued to review the data to explore other alternatives as we 
analyzed additional claims data in response to the second part of the 
request from the commenter; that is, to create a new MS-DRG that would 
contain all endovascular aneurysm repair procedures.
    In our evaluation of the claims data in response to the request to 
create a new MS-DRG, we again reviewed claims data from the December 
2014 update of the FY 2014 MedPAR file. We began our analysis by 
examining claims data for cases reporting procedure codes 39.71 and 
39.78 assigned to MS-DRGs 237 and 238. Our findings are shown in the 
table below.

                                     Endovascular Abdominal Aorta Procedures
----------------------------------------------------------------------------------------------------------------
                                                                    Number  of        Average
                             MS-DRG                                    cases      length of stay  Average  costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 237--All cases...........................................          18,340            9.46         $36,355
MS-DRG 237--Cases with procedure codes 39.71 and 39.78..........           2,425            8.34          47,363
MS-DRG 238--All cases...........................................          32,227            3.72          25,087
MS-DRG 238--Cases with procedure codes 39.71 and 39.78..........          16,502            2.27          28,998
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, the average costs for endovascular 
abdominal aorta aneurysm repair procedures assigned to MS-DRG 237 were 
higher than the average costs of all cases assigned to MS-DRGs 237. The 
average costs for cases reporting procedure codes 39.71 and 39.78 
assigned to MS-DRG 237 were $47,363 compared to the average costs of 
$36,355 for all cases assigned to MS-DRG 237 and $25,087 for all cases 
assigned to MS-DRG 238. Similarly, the average costs for cases 
reporting procedure codes 39.71 and 39.78 assigned to MS-DRG 238 were 
higher than the average costs of all cases assigned to MS-DRG 238 
($28,998 compared to $25,087). The average length of stay for cases 
reporting procedure codes 39.71 and 39.78 in MS-DRGs 237 and 238 were 
also shorter than the average length of stay for all cases in the 
respective MS-DRG.
    Our clinical advisors did not support creating a new MS-DRG 
specifically for endovascular abdominal aortic aneurysm repair 
procedures only. Therefore, we reviewed other procedure codes currently 
assigned to MS-DRGs 237 and 238 and found that there were a number of 
procedures with varying resource requirements and clinical indications 
that could be analyzed further. We agreed with our clinical advisors 
that further analysis was warranted to determine how we could better 
recognize resource utilization, clinical complexity, and average costs 
by separating the more complex, more invasive, and more expensive 
procedures used to treat more severely ill individuals from the less 
complex, less invasive, and less expensive procedures currently grouped 
to these MS-DRGs.
    Therefore, we evaluated all of the procedures currently assigned to 
MS-DRGs 237 and 238. In our evaluation, we found that MS-DRGs 237 and 
238 contained two distinct groups of procedures. We found a high volume 
of less invasive procedures, such as pericardiotomies and pulsation 
balloon implants, that had substantially lower costs than the more 
invasive procedures, such as open and endovascular repairs of the aorta 
with replacement grafts. We found that the more invasive procedures 
were primarily associated with procedures on the aorta and heart assist 
procedures.
    For this next phase of our analysis, the following procedure codes 
were designated as the more complex, more invasive procedures:
     37.41 (Implantation of prosthetic cardiac support device 
around the heart);
     37.49 (Other repair of heart and pericardium);
     37.55 (Removal of internal biventricular heart replacement 
system);
     37.64 (Removal of external heart assist system(s) or 
device(s));
     38.04 (Incision of vessel, aorta);
     38.14 (Endarterectomy, aorta);
     38.34 (Resection of vessel with anastomosis, aorta);
     38.44 (Resection of vessel with replacement, aorta, 
abdominal);
     38.64 (Other excision of vessels, aorta, abdominal);
     38.84 (Other surgical occlusion of vessels, aorta, 
abdominal);
     39.24 (Aorta-renal bypass);
     39.71 (Endovascular implantation of other graft in 
abdominal aorta); and
     39.78 (Endovascular implantation of branching or 
fenestrated graft(s) in aorta).
    There are a number of ICD-10-PCS code translations that provide 
more detailed and specific information for each of the ICD-9-CM codes 
listed above that also currently group to MS-DRGs 237 and 238 in the 
ICD-10 MS-DRGs Version 32. The comparable ICD-10-PCS code translations 
for these ICD-9-CM procedure codes are shown in the following table:

                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.41
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02UA0JZ.....................................  Supplement heart with synthetic substitute, open approach.
02UA3JZ.....................................  Supplement heart with synthetic substitute, percutaneous approach.
02UA4JZ.....................................  Supplement heart with synthetic substitute, percutaneous
                                               endoscopic approach.
----------------------------------------------------------------------------------------------------------------

    For the ICD-9-CM codes that result in greater than 50 ICD-10-PCS 
comparable code translations, we refer readers to Table 6P (ICD-10-PCS 
Code Translations for Proposed MS-DRG Changes) for this proposed rule 
(which

[[Page 24365]]

is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. The table includes the MDC topic, the 
ICD-9-CM code, and the ICD-10-PCS code translations.

                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.49
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 37.49 are shown in Table 6P.1a that is
 available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.55
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02PA0QZ.....................................  Removal of implantable heart assist system from heart, open
                                               approach.
02PA3QZ.....................................  Removal of implantable heart assist system from heart,
                                               percutaneous approach.
02PA4QZ.....................................  Removal of implantable heart assist system from heart,
                                               percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.64
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02PA0RZ.....................................  Removal of external heart assist system from heart, open approach.
02PA3RZ.....................................  Removal of external heart assist system from heart, percutaneous
                                               approach.
02PA4RZ.....................................  Removal of external heart assist system from heart, percutaneous
                                               endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.04
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02CW0ZZ.....................................  Extirpation of matter from thoracic aorta, open approach.
02CW3ZZ.....................................  Extirpation of matter from thoracic aorta, percutaneous approach.
02CW4ZZ.....................................  Extirpation of matter from thoracic aorta, percutaneous endoscopic
                                               approach.
04C00ZZ.....................................  Extirpation of matter from abdominal aorta, open approach.
04C03ZZ.....................................  Extirpation of matter from abdominal aorta, percutaneous approach.
04C04ZZ.....................................  Extirpation of matter from abdominal aorta, percutaneous
                                               endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.14
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02CW0ZZ.....................................  Extirpation of matter from thoracic aorta, open approach.
02CW3ZZ.....................................  Extirpation of matter from thoracic aorta, percutaneous approach.
02CW4ZZ.....................................  Extirpation of matter from thoracic aorta, percutaneous endoscopic
                                               approach.
04C00ZZ.....................................  Extirpation of matter from abdominal aorta, open approach.
04C03ZZ.....................................  Extirpation of matter from abdominal aorta, percutaneous approach.
04C04ZZ.....................................  Extirpation of matter from abdominal aorta, percutaneous
                                               endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.34
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02BW0ZZ.....................................  Excision of thoracic aorta, open approach.
02BW4ZZ.....................................  Excision of thoracic aorta, percutaneous endoscopic approach.
04B00ZZ.....................................  Excision of abdominal aorta, open approach.
04B04ZZ.....................................  Excision of abdominal aorta, percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.44
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
04R007Z.....................................  Replacement of abdominal aorta with autologous tissue substitute,
                                               open approach.
04R00JZ.....................................  Replacement of abdominal aorta with synthetic substitute, open
                                               approach.

[[Page 24366]]

 
04R00KZ.....................................  Replacement of abdominal aorta with nonautologous tissue
                                               substitute, open approach.
04R047Z.....................................  Replacement of abdominal aorta with autologous tissue substitute,
                                               percutaneous endoscopic approach.
04R04JZ.....................................  Replacement of abdominal aorta with synthetic substitute,
                                               percutaneous endoscopic approach.
04R04KZ.....................................  Replacement of abdominal aorta with nonautologous tissue
                                               substitute, percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.64
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
04500ZZ.....................................  Destruction of abdominal aorta, open approach.
04503ZZ.....................................  Destruction of abdominal aorta, percutaneous approach.
04504ZZ.....................................  Destruction of abdominal aorta, percutaneous endoscopic approach.
04B00ZZ.....................................  Excision of abdominal aorta, open approach.
04B03ZZ.....................................  Excision of abdominal aorta, percutaneous approach.
04B04ZZ.....................................  Excision of abdominal aorta, percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.84
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
04L00CZ.....................................  Occlusion of abdominal aorta with extraluminal device, open
                                               approach.
04L00DZ.....................................  Occlusion of abdominal aorta with intraluminal device, open
                                               approach.
04L00ZZ.....................................  Occlusion of abdominal aorta, open approach.
04L03CZ.....................................  Occlusion of abdominal aorta with extraluminal device,
                                               percutaneous approach.
04L03DZ.....................................  Occlusion of abdominal aorta with intraluminal device,
                                               percutaneous approach.
04L03ZZ.....................................  Occlusion of abdominal aorta, percutaneous approach.
04L04CZ.....................................  Occlusion of abdominal aorta with extraluminal device,
                                               percutaneous endoscopic approach.
04L04DZ.....................................  Occlusion of abdominal aorta with intraluminal device,
                                               percutaneous endoscopic approach.
04L04ZZ.....................................  Occlusion of abdominal aorta, percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.24
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
0410093.....................................  Bypass abdominal aorta to right renal artery with autologous
                                               venous tissue, open approach.
0410094.....................................  Bypass abdominal aorta to left renal artery with autologous venous
                                               tissue, open approach.
0410095.....................................  Bypass abdominal aorta to bilateral renal artery with autologous
                                               venous tissue, open approach.
04100A3.....................................  Bypass abdominal aorta to right renal artery with autologous
                                               arterial tissue, open approach.
04100A4.....................................  Bypass abdominal aorta to left renal artery with autologous
                                               arterial tissue, open approach.
04100A5.....................................  Bypass abdominal aorta to bilateral renal artery with autologous
                                               arterial tissue, open approach.
04100J3.....................................  Bypass abdominal aorta to right renal artery with synthetic
                                               substitute, open approach.
04100J4.....................................  Bypass abdominal aorta to left renal artery with synthetic
                                               substitute, open approach.
04100J5.....................................  Bypass abdominal aorta to bilateral renal artery with synthetic
                                               substitute, open approach.
04100K3.....................................  Bypass abdominal aorta to right renal artery with nonautologous
                                               tissue substitute, open approach.
04100K4.....................................  Bypass abdominal aorta to left renal artery with nonautologous
                                               tissue substitute, open approach.
04100K5.....................................  Bypass abdominal aorta to bilateral renal artery with
                                               nonautologous tissue substitute, open approach.
04100Z3.....................................  Bypass abdominal aorta to right renal artery, open approach.
04100Z4.....................................  Bypass abdominal aorta to left renal artery, open approach.
04100Z5.....................................  Bypass abdominal aorta to bilateral renal artery, open approach.
0410493.....................................  Bypass abdominal aorta to right renal artery with autologous
                                               venous tissue, percutaneous endoscopic approach.
0410494.....................................  Bypass abdominal aorta to left renal artery with autologous venous
                                               tissue, percutaneous endoscopic approach.
0410495.....................................  Bypass abdominal aorta to bilateral renal artery with autologous
                                               venous tissue, percutaneous endoscopic approach.
04104A3.....................................  Bypass abdominal aorta to right renal artery with autologous
                                               arterial tissue, percutaneous endoscopic approach.
04104A4.....................................  Bypass abdominal aorta to left renal artery with autologous
                                               arterial tissue, percutaneous endoscopic approach.
04104A5.....................................  Bypass abdominal aorta to bilateral renal artery with autologous
                                               arterial tissue, percutaneous endoscopic approach.
04104J3.....................................  Bypass abdominal aorta to right renal artery with synthetic
                                               substitute, percutaneous endoscopic approach.
04104J4.....................................  Bypass abdominal aorta to left renal artery with synthetic
                                               substitute, percutaneous endoscopic approach.
04104J5.....................................  Bypass abdominal aorta to bilateral renal artery with synthetic
                                               substitute, percutaneous endoscopic approach.
04104K3.....................................  Bypass abdominal aorta to right renal artery with nonautologous
                                               tissue substitute, percutaneous endoscopic approach.
04104K4.....................................  Bypass abdominal aorta to left renal artery with nonautologous
                                               tissue substitute, percutaneous endoscopic approach.
04104K5.....................................  Bypass abdominal aorta to bilateral renal artery with
                                               nonautologous tissue substitute, percutaneous endoscopic
                                               approach.
04104Z3.....................................  Bypass abdominal aorta to right renal artery, percutaneous
                                               endoscopic approach.
04104Z4.....................................  Bypass abdominal aorta to left renal artery, percutaneous
                                               endoscopic approach.
04104Z5.....................................  Bypass abdominal aorta to bilateral renal artery, percutaneous
                                               endoscopic approach.
----------------------------------------------------------------------------------------------------------------


[[Page 24367]]


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.71
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
04U03JZ.....................................  Supplement abdominal aorta with synthetic substitute, percutaneous
                                               approach.
04U04JZ.....................................  Supplement abdominal aorta with synthetic substitute, percutaneous
                                               endoscopic approach.
04V03DZ.....................................  Restriction of abdominal aorta with intraluminal device,
                                               percutaneous approach.
04V04DZ.....................................  Restriction of abdominal aorta with intraluminal device,
                                               percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.78
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
04793DZ.....................................  Dilation of right renal artery with intraluminal device,
                                               percutaneous approach.
04794DZ.....................................  Dilation of right renal artery with intraluminal device,
                                               percutaneous endoscopic approach.
047A3DZ.....................................  Dilation of left renal artery with intraluminal device,
                                               percutaneous approach.
047A4DZ.....................................  Dilation of left renal artery with intraluminal device,
                                               percutaneous endoscopic approach.
04753DZ.....................................  Dilation of superior mesenteric artery with intraluminal device,
                                               percutaneous approach.
04754DZ.....................................  Dilation of superior mesenteric artery with intraluminal device,
                                               percutaneous endoscopic approach.
04U03JZ.....................................  Supplement abdominal aorta with synthetic substitute, percutaneous
                                               approach.
04U04JZ.....................................  Supplement abdominal aorta with synthetic substitute, percutaneous
                                               endoscopic approach.
04V03DZ.....................................  Restriction of abdominal aorta with intraluminal device,
                                               percutaneous approach.
04V04DZ.....................................  Restriction of abdominal aorta with intraluminal device,
                                               percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------

    For the next phase of our analysis, the procedure codes shown in 
the following table were designated as the less complex, less invasive 
procedures.

           ICD-9-CM Procedure Codes That Were Designated as the Less Complex, Less Invasive Procedures
----------------------------------------------------------------------------------------------------------------
           ICD-9-CM procedure code                                     Code description
----------------------------------------------------------------------------------------------------------------
35.00.......................................  Closed heart valvotomy, unspecified valve.
35.01.......................................  Closed heart valvotomy, aortic valve.
35.02.......................................  Closed heart valvotomy, mitral valve.
35.03.......................................  Closed heart valvotomy, pulmonary valve.
35.04.......................................  Closed heart valvotomy, tricuspid valve.
37.12.......................................  Pericardiotomy.
37.24.......................................  Biopsy of pericardium.
37.31.......................................  Pericardiectomy.
37.61.......................................  Implant of pulsation balloon.
37.67.......................................  Implantation of cardiomyostimulation system.
37.91.......................................  Open chest cardiac massage.
37.99.......................................  Other operations on heart and pericardium.
38.05.......................................  Incision of vessel, other thoracic vessels.
38.06.......................................  Incision of vessel, abdominal arteries.
38.07.......................................  Incision of vessel, abdominal veins.
38.15.......................................  Endarterectomy, other thoracic vessels.
38.16.......................................  Endarterectomy, abdominal arteries.
38.35.......................................  Resection of vessel with anastomosis, other thoracic vessels.
38.36.......................................  Resection of vessel with anastomosis, abdominal arteries.
38.37.......................................  Resection of vessel with anastomosis, abdominal veins.
38.46.......................................  Resection of vessel with replacement, abdominal arteries.
38.47.......................................  Resection of vessel with replacement, abdominal veins.
38.55.......................................  Ligation and stripping of varicose veins, other thoracic vessels.
38.65.......................................  Other excision of vessels, thoracic vessels.
38.66.......................................  Other excision of vessels, abdominal arteries.
38.67.......................................  Other excision of vessels, abdominal veins.
38.85.......................................  Other surgical occlusion of vessels, thoracic vessels.
38.86.......................................  Other surgical occlusion of vessels, abdominal arteries.
38.87.......................................  Other surgical occlusion of vessels, abdominal veins.
39.0........................................  Systemic to pulmonary artery shunt.
39.1........................................  Intra-abdominal venous shunt.
39.21.......................................  Caval-pulmonary artery anastomosis.
39.22.......................................  Aorta-subclavian-carotid bypass.
39.23.......................................  Other intrathoracic vascular shunt or bypass.
39.25.......................................  Aorta-iliac-femoral bypass.
39.26.......................................  Other intra-abdominal vascular shunt or bypass.
39.52.......................................  Other repair of aneurysm.
39.54.......................................  Re-entry operation (aorta).
39.72.......................................  Endovascular (total) embolization or occlusion of head and neck
                                               vessels.
39.75.......................................  Endovascular embolization or occlusion of vessel(s) of head or
                                               neck using bare coils.

[[Page 24368]]

 
39.76.......................................  Endovascular embolization or occlusion of vessel(s) of head or
                                               neck using bioactive coils.
39.79.......................................  Other endovascular procedures on other vessels.
----------------------------------------------------------------------------------------------------------------

    There are a number of ICD-10-PCS code translations that provide 
more detailed and specific information for each of the ICD-9-CM codes 
listed in the table immediately above that also currently group to MS-
DRGs 237 and 238 in the ICD-10 MS-DRGs Version 32. The comparable ICD-
10-PCS code translations for these ICD-9-CM procedure codes are shown 
in the following tables:

                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 35.00
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02NF3ZZ.....................................  Release aortic valve, percutaneous approach.
02NF4ZZ.....................................  Release aortic valve, percutaneous endoscopic approach.
02NG3ZZ.....................................  Release mitral valve, percutaneous approach.
02NG4ZZ.....................................  Release mitral valve, percutaneous endoscopic approach.
02NH3ZZ.....................................  Release pulmonary valve, percutaneous approach.
02NH4ZZ.....................................  Release pulmonary valve, percutaneous endoscopic approach.
02NJ3ZZ.....................................  Release tricuspid valve, percutaneous approach.
02NJ4ZZ.....................................  Release tricuspid valve, percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 35.01
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02CF3ZZ.....................................  Extirpation of matter from aortic valve, percutaneous approach.
02CF4ZZ.....................................  Extirpation of matter from aortic valve, percutaneous endoscopic
                                               approach.
02NF3ZZ.....................................  Release aortic valve, percutaneous approach.
02NF4ZZ.....................................  Release aortic valve, percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                          ICD-10-PCS Code Translation for ICD-9-CM Procedure Code 35.02
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02CG3ZZ.....................................  Extirpation of matter from mitral valve, percutaneous approach.
02CG4ZZ.....................................  Extirpation of matter from mitral valve, percutaneous endoscopic
                                               approach.
02NG3ZZ.....................................  Release mitral valve, percutaneous approach.
02NG4ZZ.....................................  Release mitral valve, percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 35.03
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02CH3ZZ.....................................  Extirpation of matter from pulmonary valve, percutaneous approach.
02CH4ZZ.....................................  Extirpation of matter from pulmonary valve, percutaneous
                                               endoscopic approach.
02NH3ZZ.....................................  Release Pulmonary Valve, Percutaneous Approach.
02NH4ZZ.....................................  Release Pulmonary Valve, Percutaneous Endoscopic Approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 35.04
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                            Description
----------------------------------------------------------------------------------------------------------------
02CJ3ZZ.....................................  Extirpation of matter from tricuspid valve, percutaneous approach.
02CJ4ZZ.....................................  Extirpation of matter from tricuspid valve, percutaneous
                                               endoscopic approach.
02NJ3ZZ.....................................  Release tricuspid valve, percutaneous approach.
02NJ4ZZ.....................................  Release tricuspid valve, percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.12
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02CN0ZZ.....................................  Extirpation of matter from pericardium, open approach.
02CN3ZZ.....................................  Extirpation of matter from pericardium, percutaneous approach.

[[Page 24369]]

 
02CN4ZZ.....................................  Extirpation of matter from pericardium, percutaneous endoscopic
                                               approach.
02HN00Z.....................................  Insertion of pressure sensor monitoring device into pericardium,
                                               open approach.
02HN02Z.....................................  Insertion of monitoring device into pericardium, open approach.
02HN30Z.....................................  Insertion of pressure sensor monitoring device into pericardium,
                                               percutaneous approach.
02HN32Z.....................................  Insertion of monitoring device into pericardium, percutaneous
                                               approach.
02HN40Z.....................................  Insertion of pressure sensor monitoring device into pericardium,
                                               percutaneous endoscopic approach.
02HN42Z.....................................  Insertion of monitoring device into pericardium, percutaneous
                                               endoscopic approach.
02NN0ZZ.....................................  Release pericardium, open approach.
02NN3ZZ.....................................  Release pericardium, percutaneous approach.
02NN4ZZ.....................................  Release pericardium, percutaneous endoscopic approach.
0W9D00Z.....................................  Drainage of pericardial cavity with drainage device, open
                                               approach.
0W9D0ZX.....................................  Drainage of pericardial cavity, open approach, diagnostic.
0W9D0ZZ.....................................  Drainage of pericardial cavity, open approach.
0WCD0ZZ.....................................  Extirpation of matter from pericardial cavity, open approach.
0WCD3ZZ.....................................  Extirpation of matter from pericardial cavity, percutaneous
                                               approach.
0WCD4ZZ.....................................  Extirpation of matter from pericardial cavity, percutaneous
                                               endoscopic approach.
0WHD03Z.....................................  Insertion of infusion device into pericardial cavity, open
                                               approach.
0WHD0YZ.....................................  Insertion of other device into pericardial cavity, open approach.
0WHD33Z.....................................  Insertion of infusion device into pericardial cavity, percutaneous
                                               approach.
0WHD3YZ.....................................  Insertion of other device into pericardial cavity, percutaneous
                                               approach.
0WHD43Z.....................................  Insertion of infusion device into pericardial cavity, percutaneous
                                               endoscopic approach.
0WHD4YZ.....................................  Insertion of other device into pericardial cavity, percutaneous
                                               endoscopic approach.
0WPD00Z.....................................  Removal of drainage device from pericardial cavity, open approach.
0WPD01Z.....................................  Removal of radioactive element from pericardial cavity, open
                                               approach.
0WPD03Z.....................................  Removal of infusion device from pericardial cavity, open approach.
0WPD0YZ.....................................  Removal of other device from pericardial cavity, open approach.
0WPD30Z.....................................  Removal of drainage device from pericardial cavity, percutaneous
                                               approach.
0WPD31Z.....................................  Removal of radioactive element from pericardial cavity,
                                               percutaneous approach.
0WPD33Z.....................................  Removal of infusion device from pericardial cavity, percutaneous
                                               approach.
0WPD3YZ.....................................  Removal of other device from pericardial cavity, percutaneous
                                               approach.
0WPD40Z.....................................  Removal of drainage device from pericardial cavity, percutaneous
                                               endoscopic approach.
0WPD41Z.....................................  Removal of radioactive element from pericardial cavity,
                                               percutaneous endoscopic approach.
0WPD43Z.....................................  Removal of infusion device from pericardial cavity, percutaneous
                                               endoscopic approach.
0WPD4YZ.....................................  Removal of other device from pericardial cavity, percutaneous
                                               endoscopic approach.
0WWD00Z.....................................  Revision of drainage device in pericardial cavity, open approach.
0WWD01Z.....................................  Revision of radioactive element in pericardial cavity, open
                                               approach.
0WWD03Z.....................................  Revision of infusion device in pericardial cavity, open approach.
0WWD0YZ.....................................  Revision of other device in pericardial cavity, open approach.
0WWD30Z.....................................  Revision of drainage device in pericardial cavity, percutaneous
                                               approach.
0WWD31Z.....................................  Revision of radioactive element in pericardial cavity,
                                               percutaneous approach.
0WWD33Z.....................................  Revision of infusion device in pericardial cavity, percutaneous
                                               approach.
0WWD3YZ.....................................  Revision of other device in pericardial cavity, percutaneous
                                               approach.
0WWD40Z.....................................  Revision of drainage device in pericardial cavity, percutaneous
                                               endoscopic approach.
0WWD41Z.....................................  Revision of radioactive element in pericardial cavity,
                                               percutaneous endoscopic approach.
0WWD43Z.....................................  Revision of infusion device in pericardial cavity, percutaneous
                                               endoscopic approach.
0WWD4YZ.....................................  Revision of other device in pericardial cavity, percutaneous
                                               endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.24
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02BN0ZX.....................................  Excision of pericardium, open approach, diagnostic
02BN3ZX.....................................  Excision of pericardium, percutaneous approach, diagnostic
02BN4ZX.....................................  Excision of pericardium, percutaneous endoscopic approach,
                                               diagnostic
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.31
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
025N0ZZ.....................................  Destruction of pericardium, open approach.
025N3ZZ.....................................  Destruction of pericardium, percutaneous approach.
025N4ZZ.....................................  Destruction of pericardium, percutaneous endoscopic approach.
02BN0ZZ.....................................  Excision of pericardium, open approach.
02BN3ZZ.....................................  Excision of pericardium, percutaneous approach.
02BN4ZZ.....................................  Excision of pericardium, percutaneous endoscopic approach.
02TN0ZZ.....................................  Resection of pericardium, open approach.
02TN3ZZ.....................................  Resection of pericardium, percutaneous approach.
02TN4ZZ.....................................  Resection of pericardium, percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------


[[Page 24370]]


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.61
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
5A02110.....................................  Assistance with cardiac output using balloon pump, intermittent.
5A02210.....................................  Assistance with cardiac output using balloon pump, continuous.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.67
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02QA0ZZ.....................................  Repair heart, open approach.
02QA3ZZ.....................................  Repair heart, percutaneous approach.
02QA4ZZ.....................................  Repair heart, percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.91
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02QA0ZZ.....................................  Repair heart, open approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 37.99
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02880ZZ.....................................  Division of conduction mechanism, open approach.
02883ZZ.....................................  Division of conduction mechanism, percutaneous approach.
02884ZZ.....................................  Division of conduction mechanism, percutaneous endoscopic
                                               approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.05
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 38.05 are shown in Table 6P.1b for this
 proposed rule, which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.06
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
04C10ZZ.....................................  Extirpation of matter from celiac artery, open approach.
04C13ZZ.....................................  Extirpation of matter from celiac artery, percutaneous approach.
04C14ZZ.....................................  Extirpation of matter from celiac artery, percutaneous endoscopic
                                               approach.
04C20ZZ.....................................  Extirpation of matter from gastric artery, open approach.
04C23ZZ.....................................  Extirpation of matter from gastric artery, percutaneous approach.
04C24ZZ.....................................  Extirpation of matter from gastric artery, percutaneous endoscopic
                                               approach.
04C30ZZ.....................................  Extirpation of matter from hepatic artery, open approach.
04C33ZZ.....................................  Extirpation of matter from hepatic artery, percutaneous approach.
04C34ZZ.....................................  Extirpation of matter from hepatic artery, percutaneous endoscopic
                                               approach.
04C40ZZ.....................................  Extirpation of matter from splenic artery, open approach.
04C43ZZ.....................................  Extirpation of matter from splenic artery, percutaneous approach.
04C44ZZ.....................................  Extirpation of matter from splenic artery, percutaneous endoscopic
                                               approach.
04C50ZZ.....................................  Extirpation of matter from superior mesenteric artery, open
                                               approach.
04C53ZZ.....................................  Extirpation of matter from superior mesenteric artery,
                                               percutaneous approach.
04C54ZZ.....................................  Extirpation of matter from superior mesenteric artery,
                                               percutaneous endoscopic approach.
04C60ZZ.....................................  Extirpation of matter from right colic artery, open approach.
04C63ZZ.....................................  Extirpation of matter from right colic artery, percutaneous
                                               approach.
04C64ZZ.....................................  Extirpation of matter from right colic artery, percutaneous
                                               endoscopic approach.
04C70ZZ.....................................  Extirpation of matter from left colic artery, open approach.
04C73ZZ.....................................  Extirpation of matter from left colic artery, percutaneous
                                               approach.
04C74ZZ.....................................  Extirpation of matter from left colic artery, percutaneous
                                               endoscopic approach.
04C80ZZ.....................................  Extirpation of matter from middle colic artery, open approach.
04C83ZZ.....................................  Extirpation of matter from middle colic artery, percutaneous
                                               approach.
04C84ZZ.....................................  Extirpation of matter from middle colic artery, percutaneous
                                               endoscopic approach.
04C90ZZ.....................................  Extirpation of matter from right renal artery, open approach.
04C93ZZ.....................................  Extirpation of matter from right renal artery, percutaneous
                                               approach.
04C94ZZ.....................................  Extirpation of matter from right renal artery, percutaneous
                                               endoscopic approach.
04CA0ZZ.....................................  Extirpation of matter from left renal artery, open approach.
04CA3ZZ.....................................  Extirpation of matter from left renal artery, percutaneous
                                               approach.
04CA4ZZ.....................................  Extirpation of matter from left renal artery, percutaneous
                                               endoscopic approach.

[[Page 24371]]

 
04CB0ZZ.....................................  Extirpation of matter from inferior mesenteric artery, open
                                               approach.
04CB3ZZ.....................................  Extirpation of matter from inferior mesenteric artery,
                                               percutaneous approach.
04CB4ZZ.....................................  Extirpation of matter from inferior mesenteric artery,
                                               percutaneous endoscopic approach.
04CC0ZZ.....................................  Extirpation of matter from right common iliac artery, open
                                               approach.
04CC3ZZ.....................................  Extirpation of matter from right common iliac artery, percutaneous
                                               approach.
04CC4ZZ.....................................  Extirpation of matter from right common iliac artery, percutaneous
                                               endoscopic approach.
04CD0ZZ.....................................  Extirpation of matter from left common iliac artery, open
                                               approach.
04CD3ZZ.....................................  Extirpation of matter from left common iliac artery, percutaneous
                                               approach.
04CD4ZZ.....................................  Extirpation of matter from left common iliac artery, percutaneous
                                               endoscopic approach.
04CE0ZZ.....................................  Extirpation of matter from right internal iliac artery, open
                                               approach.
04CE3ZZ.....................................  Extirpation of matter from right internal iliac artery,
                                               percutaneous approach.
04CE4ZZ.....................................  Extirpation of matter from right internal iliac artery,
                                               percutaneous endoscopic approach.
04CF0ZZ.....................................  Extirpation of matter from left internal iliac artery, open
                                               approach.
04CF3ZZ.....................................  Extirpation of matter from left internal iliac artery,
                                               percutaneous approach.
04CF4ZZ.....................................  Extirpation of matter from left internal iliac artery,
                                               percutaneous endoscopic approach.
04CH0ZZ.....................................  Extirpation of matter from right external iliac artery, open
                                               approach.
04CH3ZZ.....................................  Extirpation of matter from right external iliac artery,
                                               percutaneous approach.
04CH4ZZ.....................................  Extirpation of matter from right external iliac artery,
                                               percutaneous endoscopic approach.
04CJ0ZZ.....................................  Extirpation of matter from left external iliac artery, open
                                               approach.
04CJ3ZZ.....................................  Extirpation of matter from left external iliac artery,
                                               percutaneous approach.
04CJ4ZZ.....................................  Extirpation of matter from left external iliac artery,
                                               percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.07
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
06C00ZZ.....................................  Extirpation of matter from inferior vena cava, open approach.
06C03ZZ.....................................  Extirpation of matter from inferior vena cava, percutaneous
                                               approach.
06C04ZZ.....................................  Extirpation of matter from inferior vena vava, percutaneous
                                               endoscopic approach.
06C10ZZ.....................................  Extirpation of matter from splenic vein, open approach.
06C13ZZ.....................................  Extirpation of matter from splenic vein, percutaneous approach.
06C14ZZ.....................................  Extirpation of matter from splenic vein, percutaneous endoscopic
                                               approach.
06C20ZZ.....................................  Extirpation of matter from gastric vein, open approach.
06C23ZZ.....................................  Extirpation of matter from gastric vein, percutaneous approach.
06C24ZZ.....................................  Extirpation of matter from gastric vein, percutaneous endoscopic
                                               approach.
06C40ZZ.....................................  Extirpation of matter from hepatic vein, open approach.
06C43ZZ.....................................  Extirpation of matter from hepatic vein, percutaneous approach.
06C44ZZ.....................................  Extirpation of matter from hepatic vein, percutaneous endoscopic
                                               approach.
06C50ZZ.....................................  Extirpation of matter from superior mesenteric vein, open
                                               approach.
06C53ZZ.....................................  Extirpation of matter from superior mesenteric vein, percutaneous
                                               approach.
06C54ZZ.....................................  Extirpation of matter from superior mesenteric vein, percutaneous
                                               endoscopic approach.
06C60ZZ.....................................  Extirpation of matter from inferior mesenteric vein, open
                                               approach.
06C63ZZ.....................................  Extirpation of matter from inferior mesenteric vein, percutaneous
                                               approach.
06C64ZZ.....................................  Extirpation of matter from inferior mesenteric vein, percutaneous
                                               endoscopic approach.
06C70ZZ.....................................  Extirpation of matter from colic vein, open approach.
06C73ZZ.....................................  Extirpation of matter from colic vein, percutaneous approach.
06C74ZZ.....................................  Extirpation of matter from colic vein, percutaneous endoscopic
                                               approach.
06C80ZZ.....................................  Extirpation of matter from portal vein, open approach.
06C83ZZ.....................................  Extirpation of matter from portal vein, percutaneous approach.
06C84ZZ.....................................  Extirpation of matter from portal vein, percutaneous endoscopic
                                               approach.
06C90ZZ.....................................  Extirpation of matter from right renal vein, open approach.
06C93ZZ.....................................  Extirpation of matter from right renal vein, percutaneous
                                               approach.
06C94ZZ.....................................  Extirpation of matter from right renal vein, percutaneous
                                               endoscopic approach.
06CB0ZZ.....................................  Extirpation of matter from left renal vein, open approach.
06CB3ZZ.....................................  Extirpation of matter from left renal vein, percutaneous approach.
06CB4ZZ.....................................  Extirpation of matter from left renal vein, percutaneous
                                               endoscopic approach.
06CC0ZZ.....................................  Extirpation of matter from right common iliac vein, open approach.
06CC3ZZ.....................................  Extirpation of matter from right common iliac vein, percutaneous
                                               approach.
06CC4ZZ.....................................  Extirpation of matter from right common iliac vein, percutaneous
                                               endoscopic approach.
06CD0ZZ.....................................  Extirpation of matter from left common iliac vein, open approach.
06CD3ZZ.....................................  Extirpation of matter from left common iliac vein, percutaneous
                                               approach.
06CD4ZZ.....................................  Extirpation of matter from left common iliac vein, percutaneous
                                               endoscopic approach.
06CF0ZZ.....................................  Extirpation of matter from right external iliac vein, open
                                               approach.
06CF3ZZ.....................................  Extirpation of matter from right external iliac vein, percutaneous
                                               approach.
06CF4ZZ.....................................  Extirpation of matter from right external iliac vein, percutaneous
                                               endoscopic approach.
06CG0ZZ.....................................  Extirpation of matter from left external iliac vein, open
                                               approach.
06CG3ZZ.....................................  Extirpation of matter from left external iliac vein, percutaneous
                                               approach.
06CG4ZZ.....................................  Extirpation of matter from left external iliac vein, percutaneous
                                               endoscopic approach.
06CH0ZZ.....................................  Extirpation of matter from right hypogastric vein, open approach.
06CH3ZZ.....................................  Extirpation of matter from right hypogastric vein, percutaneous
                                               approach.
06CH4ZZ.....................................  Extirpation of matter from right hypogastric vein, percutaneous
                                               endoscopic approach.

[[Page 24372]]

 
06CJ0ZZ.....................................  Extirpation of matter from left hypogastric vein, open approach.
06CJ3ZZ.....................................  Extirpation of matter from left hypogastric vein, percutaneous
                                               approach.
06CJ4ZZ.....................................  Extirpation of matter from left hypogastric vein, percutaneous
                                               endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.15
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02CP0ZZ.....................................  Extirpation of matter from pulmonary trunk, open approach.
02CP3ZZ.....................................  Extirpation of matter from pulmonary trunk, percutaneous approach.
02CP4ZZ.....................................  Extirpation of matter from pulmonary trunk, percutaneous
                                               endoscopic approach.
02CQ0ZZ.....................................  Extirpation of matter from right pulmonary artery, open approach.
02CQ3ZZ.....................................  Extirpation of matter from right pulmonary artery, percutaneous
                                               approach.
02CQ4ZZ.....................................  Extirpation of matter from right pulmonary artery, percutaneous
                                               endoscopic approach.
02CR0ZZ.....................................  Extirpation of matter from left pulmonary artery, open approach.
02CR3ZZ.....................................  Extirpation of matter from left pulmonary artery, percutaneous
                                               approach.
02CR4ZZ.....................................  Extirpation of matter from left pulmonary artery, percutaneous
                                               endoscopic approach.
02CS0ZZ.....................................  Extirpation of matter from right pulmonary vein, open approach.
02CS3ZZ.....................................  Extirpation of matter from right pulmonary vein, percutaneous
                                               approach.
02CS4ZZ.....................................  Extirpation of matter from right pulmonary vein, percutaneous
                                               endoscopic approach.
02CT0ZZ.....................................  Extirpation of matter from left pulmonary vein, open approach.
02CT3ZZ.....................................  Extirpation of matter from left pulmonary vein, percutaneous
                                               approach.
02CT4ZZ.....................................  Extirpation of matter from left pulmonary vein, percutaneous
                                               endoscopic approach.
02CV0ZZ.....................................  Extirpation of matter from superior vena cava, open approach.
02CV3ZZ.....................................  Extirpation of matter from superior vena cava, percutaneous
                                               approach.
02CV4ZZ.....................................  Extirpation of matter from superior vena cava, percutaneous
                                               endoscopic approach.
03C00ZZ.....................................  Extirpation of matter from right internal mammary artery, open
                                               approach.
03C03ZZ.....................................  Extirpation of matter from right internal mammary artery,
                                               percutaneous approach.
03C04ZZ.....................................  Extirpation of matter from right internal mammary artery,
                                               percutaneous endoscopic approach.
03C10ZZ.....................................  Extirpation of matter from left internal mammary artery, open
                                               approach.
03C13ZZ.....................................  Extirpation of matter from left internal mammary artery,
                                               percutaneous approach.
03C14ZZ.....................................  Extirpation of matter from left internal mammary artery,
                                               percutaneous endoscopic approach.
03C20ZZ.....................................  Extirpation of matter from innominate artery, open approach.
03C23ZZ.....................................  Extirpation of matter from innominate artery, percutaneous
                                               approach.
03C24ZZ.....................................  Extirpation of matter from innominate artery, percutaneous
                                               endoscopic approach.
03C30ZZ.....................................  Extirpation of matter from right subclavian artery, open approach.
03C33ZZ.....................................  Extirpation of matter from right subclavian artery, percutaneous
                                               approach.
03C34ZZ.....................................  Extirpation of matter from right subclavian artery, percutaneous
                                               endoscopic approach.
03C40ZZ.....................................  Extirpation of matter from left subclavian artery, open approach.
03C43ZZ.....................................  Extirpation of matter from left subclavian artery, percutaneous
                                               approach.
03C44ZZ.....................................  Extirpation of matter from left subclavian artery, percutaneous
                                               endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.16
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 38.16 are shown in Table 6P.1c for this
 proposed rule, which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.35
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02BP0ZZ.....................................  Excision of pulmonary trunk, open approach.
02BP4ZZ.....................................  Excision of pulmonary trunk, percutaneous endoscopic approach.
02BQ0ZZ.....................................  Excision of right pulmonary artery, open approach.
02BQ4ZZ.....................................  Excision of right pulmonary artery, percutaneous endoscopic
                                               approach.
02BR0ZZ.....................................  Excision of left pulmonary artery, open approach.
02BR4ZZ.....................................  Excision of left pulmonary artery, percutaneous endoscopic
                                               approach.
02BS0ZZ.....................................  Excision of right pulmonary vein, open approach.
02BS4ZZ.....................................  Excision of right pulmonary vein, percutaneous endoscopic
                                               approach.
02BT0ZZ.....................................  Excision of left pulmonary vein, open approach.
02BT4ZZ.....................................  Excision of left pulmonary vein, percutaneous endoscopic approach.
02BV0ZZ.....................................  Excision of superior vena cava, open approach.
02BV4ZZ.....................................  Excision of superior vena cava, percutaneous endoscopic approach.
03B00ZZ.....................................  Excision of right internal mammary artery, open approach.
03B04ZZ.....................................  Excision of right internal mammary artery, percutaneous endoscopic
                                               approach.
03B10ZZ.....................................  Excision of left internal mammary artery, open approach.

[[Page 24373]]

 
03B14ZZ.....................................  Excision of left internal mammary artery, percutaneous endoscopic
                                               approach.
03B20ZZ.....................................  Excision of innominate artery, open approach.
03B24ZZ.....................................  Excision of innominate artery, percutaneous endoscopic approach.
03B30ZZ.....................................  Excision of right subclavian artery, open approach.
03B34ZZ.....................................  Excision of right subclavian artery, percutaneous endoscopic
                                               approach.
03B40ZZ.....................................  Excision of left subclavian artery, open approach.
03B44ZZ.....................................  Excision of left subclavian artery, percutaneous endoscopic
                                               approach.
05B00ZZ.....................................  Excision of azygos vein, open approach.
05B04ZZ.....................................  Excision of azygos vein, percutaneous endoscopic approach.
05B10ZZ.....................................  Excision of hemiazygos vein, open approach.
05B14ZZ.....................................  Excision of hemiazygos vein, percutaneous endoscopic approach.
05B30ZZ.....................................  Excision of right innominate vein, open approach.
05B34ZZ.....................................  Excision of right innominate vein, percutaneous endoscopic
                                               approach.
05B40ZZ.....................................  Excision of left innominate vein, open approach.
05B44ZZ.....................................  Excision of left innominate vein, percutaneous endoscopic
                                               approach.
05B50ZZ.....................................  Excision of right subclavian vein, open approach.
05B54ZZ.....................................  Excision of right subclavian vein, percutaneous endoscopic
                                               approach.
05B60ZZ.....................................  Excision of left subclavian vein, open approach.
05B64ZZ.....................................  Excision of left subclavian vein, percutaneous endoscopic
                                               approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.36
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
04B10ZZ.....................................  Excision of celiac artery, open approach.
04B14ZZ.....................................  Excision of celiac artery, percutaneous endoscopic approach.
04B20ZZ.....................................  Excision of gastric artery, open approach.
04B24ZZ.....................................  Excision of gastric artery, percutaneous endoscopic approach.
04B30ZZ.....................................  Excision of hepatic artery, open approach.
04B34ZZ.....................................  Excision of hepatic artery, percutaneous endoscopic approach.
04B40ZZ.....................................  Excision of splenic artery, open approach.
04B44ZZ.....................................  Excision of splenic artery, percutaneous endoscopic approach.
04B50ZZ.....................................  Excision of superior mesenteric artery, open approach.
04B54ZZ.....................................  Excision of superior mesenteric artery, percutaneous endoscopic
                                               approach.
04B60ZZ.....................................  Excision of right colic artery, open approach.
04B64ZZ.....................................  Excision of right colic artery, percutaneous endoscopic approach.
04B70ZZ.....................................  Excision of left colic artery, open approach.
04B74ZZ.....................................  Excision of left colic artery, percutaneous endoscopic approach.
04B80ZZ.....................................  Excision of middle colic artery, open approach.
04B84ZZ.....................................  Excision of middle colic artery, percutaneous endoscopic approach.
04B90ZZ.....................................  Excision of right renal artery, open approach.
04B94ZZ.....................................  Excision of right renal artery, percutaneous endoscopic approach.
04BA0ZZ.....................................  Excision of left renal artery, open approach.
04BA4ZZ.....................................  Excision of left renal artery, percutaneous endoscopic approach.
04BB0ZZ.....................................  Excision of inferior mesenteric artery, open approach.
04BB4ZZ.....................................  Excision of inferior mesenteric artery, percutaneous endoscopic
                                               approach.
04BC0ZZ.....................................  Excision of right common iliac artery, open approach.
04BC4ZZ.....................................  Excision of right common iliac artery, percutaneous endoscopic
                                               approach.
04BD0ZZ.....................................  Excision of left common iliac artery, open approach.
04BD4ZZ.....................................  Excision of left common iliac artery, percutaneous endoscopic
                                               approach.
04BE0ZZ.....................................  Excision of right internal iliac artery, open approach.
04BE4ZZ.....................................  Excision of right internal iliac artery, percutaneous endoscopic
                                               approach.
04BF0ZZ.....................................  Excision of left internal iliac artery, open approach.
04BF4ZZ.....................................  Excision of left internal iliac artery, percutaneous endoscopic
                                               approach.
04BH0ZZ.....................................  Excision of right external iliac artery, open approach.
04BH4ZZ.....................................  Excision of right external iliac artery, percutaneous endoscopic
                                               approach.
04BJ0ZZ.....................................  Excision of left external iliac artery, open approach.
04BJ4ZZ.....................................  Excision of left external iliac artery, percutaneous endoscopic
                                               approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.37
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
06B00ZZ.....................................  Excision of inferior vena cava, open approach.
06B04ZZ.....................................  Excision of inferior vena cava, percutaneous endoscopic approach.
06B10ZZ.....................................  Excision of splenic vein, open approach.
06B14ZZ.....................................  Excision of splenic vein, percutaneous endoscopic approach.
06B20ZZ.....................................  Excision of gastric vein, open approach.
06B24ZZ.....................................  Excision of gastric vein, percutaneous endoscopic approach.
06B40ZZ.....................................  Excision of hepatic vein, open approach.

[[Page 24374]]

 
06B44ZZ.....................................  Excision of hepatic vein, percutaneous endoscopic approach.
06B50ZZ.....................................  Excision of superior mesenteric vein, open approach.
06B54ZZ.....................................  Excision of superior mesenteric vein, percutaneous endoscopic
                                               approach.
06B60ZZ.....................................  Excision of inferior mesenteric vein, open approach.
06B64ZZ.....................................  Excision of inferior mesenteric vein, percutaneous endoscopic
                                               approach.
06B70ZZ.....................................  Excision of colic vein, open approach.
06B74ZZ.....................................  Excision of colic vein, percutaneous endoscopic approach.
06B80ZZ.....................................  Excision of portal vein, open approach.
06B84ZZ.....................................  Excision of portal vein, percutaneous endoscopic approach.
06B90ZZ.....................................  Excision of right renal vein, open approach.
06B94ZZ.....................................  Excision of right renal vein, percutaneous endoscopic approach.
06BB0ZZ.....................................  Excision of left renal vein, open approach.
06BB4ZZ.....................................  Excision of left renal vein, percutaneous endoscopic approach.
06BC0ZZ.....................................  Excision of right common iliac vein, open approach.
06BC4ZZ.....................................  Excision of right common iliac vein, percutaneous endoscopic
                                               approach.
06BD0ZZ.....................................  Excision of left common iliac vein, open approach.
06BD4ZZ.....................................  Excision of left common iliac vein, percutaneous endoscopic
                                               approach.
06BF0ZZ.....................................  Excision of right external iliac vein, open approach.
06BF4ZZ.....................................  Excision of right external iliac vein, percutaneous endoscopic
                                               approach.
06BG0ZZ.....................................  Excision of left external iliac vein, open approach.
06BG4ZZ.....................................  Excision of left external iliac vein, percutaneous endoscopic
                                               approach.
06BH0ZZ.....................................  Excision of right hypogastric vein, open approach.
06BH4ZZ.....................................  Excision of right hypogastric vein, percutaneous endoscopic
                                               approach.
06BJ0ZZ.....................................  Excision of left hypogastric vein, open approach.
06BJ4ZZ.....................................  Excision of left hypogastric vein, percutaneous endoscopic
                                               approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.46
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 38.46 are shown in Table 6P.1d for this
 proposed rule, which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.47
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 38.47 are shown in Table 6P.1e for this
 proposed rule, which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------

    There is not an equivalent ICD-10-PCS code translation for ICD-9-CM 
procedure code 38.55.

                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.65
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 38.65 are shown in Table 6P.1f for this
 proposed rule, which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.66
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 38.66 are shown in Table 6P.1g for this
 proposed rule, which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------


[[Page 24375]]


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.67
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 38.67 are shown in Table 6P.1h for this
 proposed rule, which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.85
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 38.85 are shown in Table 6P.1i for this
 proposed rule, which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.86
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 38.86 are shown in Table 6P.1j for this
 proposed rule, which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 38.87
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 38.87 are shown in Table 6P.1k for this
 proposed rule, which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------


                          ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.0
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 39.0 are shown in Table 6P.1l for this
 proposed rule, which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------


                          ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.1
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 39.1 are shown in Table 6P.1m for this
 proposed rule, which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.21
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
021V09P.....................................  Bypass superior vena cava to pulmonary trunk with autologous
                                               venous tissue, open approach.
021V09Q.....................................  Bypass superior vena cava to right pulmonary artery with
                                               autologous venous tissue, open approach.
021V09R.....................................  Bypass superior vena cava to left pulmonary artery with autologous
                                               venous tissue, open approach.
021V0AP.....................................  Bypass superior vena cava to pulmonary trunk with autologous
                                               arterial tissue, open approach.
021V0AQ.....................................  Bypass superior vena cava to right pulmonary artery with
                                               autologous arterial tissue, open approach.
021V0AR.....................................  Bypass superior vena cava to left pulmonary artery with autologous
                                               arterial tissue, open approach.
021V0JP.....................................  Bypass superior vena cava to pulmonary trunk with synthetic
                                               substitute, open approach.
021V0JQ.....................................  Bypass superior vena cava to right pulmonary artery with synthetic
                                               substitute, open approach.
021V0JR.....................................  Bypass superior vena cava to left pulmonary artery with synthetic
                                               substitute, open approach.
021V0KP.....................................  Bypass superior vena cava to pulmonary trunk with nonautologous
                                               tissue substitute, open approach.
021V0KQ.....................................  Bypass superior vena cava to right pulmonary artery with
                                               nonautologous tissue substitute, open approach.
021V0KR.....................................  Bypass superior vena cava to left pulmonary artery with
                                               nonautologous tissue substitute, open approach.
021V0ZP.....................................  Bypass superior vena cava to pulmonary trunk, open approach.
021V0ZQ.....................................  Bypass superior vena cava to right pulmonary artery, open
                                               approach.
021V0ZR.....................................  Bypass superior vena cava to left pulmonary artery, open approach.
021V49P.....................................  Bypass superior vena cava to pulmonary trunk with autologous
                                               venous tissue, percutaneous endoscopic approach.
021V49Q.....................................  Bypass superior vena cava to right pulmonary artery with
                                               autologous venous tissue, percutaneous endoscopic approach.

[[Page 24376]]

 
021V49R.....................................  Bypass superior vena cava to left pulmonary artery with autologous
                                               venous tissue, percutaneous endoscopic approach.
021V4AP.....................................  Bypass superior vena cava to pulmonary trunk with autologous
                                               arterial tissue, percutaneous endoscopic approach.
021V4AQ.....................................  Bypass superior vena cava to right pulmonary artery with
                                               autologous arterial tissue, percutaneous endoscopic approach.
021V4AR.....................................  Bypass superior vena cava to left pulmonary artery with autologous
                                               arterial tissue, percutaneous endoscopic approach.
021V4JP.....................................  Bypass superior vena cava to pulmonary trunk with synthetic
                                               substitute, percutaneous endoscopic approach.
021V4JQ.....................................  Bypass superior vena cava to right pulmonary artery with synthetic
                                               substitute, percutaneous endoscopic approach.
021V4JR.....................................  Bypass superior vena cava to left pulmonary artery with synthetic
                                               substitute, percutaneous endoscopic approach.
021V4KP.....................................  Bypass superior vena cava to pulmonary trunk with nonautologous
                                               tissue substitute, percutaneous endoscopic approach.
021V4KQ.....................................  Bypass superior vena cava to right pulmonary artery with
                                               nonautologous tissue substitute, percutaneous endoscopic
                                               approach.
021V4KR.....................................  Bypass superior vena cava to left pulmonary artery with
                                               nonautologous tissue substitute, percutaneous endoscopic
                                               approach.
021V4ZP.....................................  Bypass superior vena cava to pulmonary trunk, percutaneous
                                               endoscopic approach.
021V4ZQ.....................................  Bypass superior vena cava to right pulmonary artery, percutaneous
                                               endoscopic approach.
021V4ZR.....................................  Bypass superior vena cava to left pulmonary artery, percutaneous
                                               endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.22
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
021W09B.....................................  Bypass thoracic aorta to subclavian with autologous venous tissue,
                                               open approach).
021W09D.....................................  Bypass thoracic aorta to carotid with autologous venous tissue,
                                               open approach).
021W0AB.....................................  Bypass thoracic aorta to subclavian with autologous arterial
                                               tissue, open approach.
021W0AD.....................................  Bypass thoracic aorta to carotid with autologous arterial tissue,
                                               open approach.
021W0JB.....................................  Bypass thoracic aorta to subclavian with synthetic substitute,
                                               open approach.
021W0JD.....................................  Bypass thoracic aorta to carotid with synthetic substitute, open
                                               approach.
021W0KB.....................................  Bypass thoracic aorta to subclavian with nonautologous tissue
                                               substitute, open approach.
021W0KD.....................................  Bypass thoracic aorta to carotid with nonautologous tissue
                                               substitute, open approach.
021W0ZB.....................................  Bypass thoracic aorta to subclavian, open approach.
021W0ZD.....................................  Bypass thoracic aorta to carotid, open approach.
021W49B.....................................  Bypass thoracic aorta to subclavian with autologous venous tissue,
                                               percutaneous endoscopic approach.
021W49D.....................................  Bypass thoracic aorta to carotid with autologous venous tissue,
                                               percutaneous endoscopic approach.
021W4AB.....................................  Bypass thoracic aorta to subclavian with autologous arterial
                                               tissue, percutaneous endoscopic approach.
021W4AD.....................................  Bypass thoracic aorta to carotid with autologous arterial tissue,
                                               percutaneous endoscopic approach.
021W4JB.....................................  Bypass thoracic aorta to subclavian with synthetic substitute,
                                               percutaneous endoscopic approach.
021W4JD.....................................  Bypass thoracic aorta to carotid with synthetic substitute,
                                               percutaneous endoscopic approach.
021W4KB.....................................  Bypass thoracic aorta to subclavian with nonautologous tissue
                                               substitute, percutaneous endoscopic approach.
021W4KD.....................................  Bypass thoracic aorta to carotid with nonautologous tissue
                                               substitute, percutaneous endoscopic approach.
021W4ZB.....................................  Bypass thoracic aorta to subclavian, percutaneous endoscopic
                                               approach.
021W4ZD.....................................  Bypass thoracic aorta to carotid, percutaneous endoscopic
                                               approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.23
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 39.23 are shown in Table 6P.1n for this
 proposed rule, which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.25
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 39.25 are shown in Table 6P.1o for this
 proposed rule, which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.26
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 39.26 are shown in Table 6P.1p for this
 proposed rule, which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------


[[Page 24377]]


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.52
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 39.52 are shown in Table 6P.1q for this
 proposed rule, which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.54
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
02QW0ZZ.....................................  Repair thoracic aorta, open approach.
02QW3ZZ.....................................  Repair thoracic aorta, percutaneous approach.
02QW4ZZ.....................................  Repair thoracic aorta, percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.72
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
03LR0DZ.....................................  Occlusion of face artery with intraluminal device, open approach.
03LR3DZ.....................................  Occlusion of face artery with intraluminal device, percutaneous
                                               approach.
03LR4DZ.....................................  Occlusion of face artery with intraluminal device, percutaneous
                                               endoscopic approach.
03LS0DZ.....................................  Occlusion of right temporal artery with intraluminal device, open
                                               approach.
03LS3DZ.....................................  Occlusion of right temporal artery with intraluminal device,
                                               percutaneous approach.
03LS4DZ.....................................  Occlusion of right temporal artery with intraluminal device,
                                               percutaneous endoscopic approach.
03LT0DZ.....................................  Occlusion of left temporal artery with intraluminal device, open
                                               approach.
03LT3DZ.....................................  Occlusion of left temporal artery with intraluminal device,
                                               percutaneous approach.
03LT4DZ.....................................  Occlusion of left temporal artery with intraluminal device,
                                               percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.75
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 39.75 are shown in Table 6P.1r for this
 proposed rule, which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.76
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 39.76 are shown in Table 6P.1s for this
 proposed rule, which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------


                         ICD-10-PCS Code Translations for ICD-9-CM Procedure Code 39.79
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
The comparable ICD-10-PCS code translations for ICD-9-CM procedure code 39.79 are shown in Table 6P.1t for this
 proposed rule, which is available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
----------------------------------------------------------------------------------------------------------------

    As previously stated, we separated the more complex, more invasive 
procedures from the less complex, less invasive procedures to continue 
our evaluation of the procedures assigned to MS-DRGs 237 and 238. Our 
data analysis showed that the distribution of cases, the average length 
of stay, and average costs of the more complex, more invasive aortic 
and heart assist procedures and the less complex, less invasive other 
cardiovascular procedures would be more appropriately reflected if we 
classified these distinguishing types of procedures under newly created 
MS-DRGs, as reflected in the table below.

                              Major Cardiovascular Procedures With and Without MCC
----------------------------------------------------------------------------------------------------------------
                                                                    Number  of        Average
                             MS-DRG                                    cases      length of stay  Average  costs
----------------------------------------------------------------------------------------------------------------
MS-DRGs 237 and 238--Combined...................................          50,567             5.8         $29,174

[[Page 24378]]

 
MS-DRGs 237 and 238--Cases with more complex, more invasive               22,278             4.0          31,729
 procedure codes (37.41; 37.49; 37.55; 37.64; 38.04; 38.14;
 38.34; 38.44; 38.64; 38.84; 39.24; 39.71, and 39.78)...........
MS-DRGs 237 and 238--Cases with less complex, less invasive               28,289             7.1          27,162
 procedure codes (35.00; 35.01; 35.02; 35.03; 35.04; 37.12;
 37.24; 37.31; 37.61; 37.67; 37.91; 37.99; 38.05; 38.06; 38.07;
 38.15; 38.16; 38.35; 38.36; 38.37; 38.46; 38.47; 38.55; 38.65;
 38.66; 38.67; 38.85; 38.86; 38.87; 39.0; 39.1; 39.21; 39.22;
 39.23; 39.25; 39.26; 39.52; 39.54; 39.72; 39.75; 39.76; and
 39.79).........................................................
----------------------------------------------------------------------------------------------------------------

    Our clinical advisors reviewed the results of the analysis and 
agreed that distinguishing the more complex, more invasive procedures 
from the less complex, less invasive procedures would result in 
improved clinical coherence for the various cardiovascular procedures 
currently assigned to MS-DRGs 237 and 238, as listed previously. 
Therefore, for FY 2016, we are proposing to delete MS-DRGs 237 and 238. 
When we applied our established criteria to determine if the creation 
of a new CC or MCC subgroup within a base MS-DRG is warranted, we 
determined that a 2-way severity level split (with MCC and without MCC) 
was justified. Therefore, we are proposing to create two new MS-DRGs 
that would contain the more complex, more invasive aortic and heart 
assist procedures currently assigned to MS-DRGs 237 and 238, as listed 
previously. We are proposing to create MS-DRG 268, entitled ``Aortic 
and Heart Assist Procedures Except Pulsation Balloon with MCC,'' and 
MS-DRG 269, entitled ``Aortic and Heart Assist Procedures Except 
Pulsation Balloon without MCC.'' The table below shows the distribution 
of cases and the average length of stay and average costs of the more 
complex, more invasive procedures for aortic and heart assistance for 
the proposed new MS-DRGs 268 and 269.

                           Proposed New MS-DRGs for Aortic and Heart Assist Procedures
----------------------------------------------------------------------------------------------------------------
                                                                    Number  of        Average
                             MS-DRG                                    cases      length of stay  Average  costs
----------------------------------------------------------------------------------------------------------------
Proposed New MS-DRG 268 with MCC................................           4,182           10.03         $45,996
Proposed New MS-DRG 269 without MCC.............................          18,096            2.68          28,431
----------------------------------------------------------------------------------------------------------------

    We are inviting public comments on this proposal and the ICD-10-PCS 
code translations for these procedures shown earlier in this section, 
which we also are proposing to assign to proposed new MS-DRGs 268 and 
269.
    In addition, when we further applied our established criteria to 
determine if the creation of a new CC or MCC subgroup for the remaining 
procedures was warranted, we determined that a 3-way severity level 
split (with MCC, with CC, and without CC/MCC) was justified. Therefore, 
we are proposing to create three new MS-DRGs that would contain the 
remaining cardiovascular procedures that were designated as the less 
complex, less invasive procedures, as listed previously. For FY 2016, 
we are proposing to create MS-DRG 270, entitled ``Other Major 
Cardiovascular Procedures with MCC''; MS-DRG 271, entitled ``Other 
Major Cardiovascular Procedures with CC''; and MS-DRG 272, entitled 
``Other Major Cardiovascular Procedures without CC/MCC,'' and to assign 
the less complex, less invasive cardiovascular procedures shown earlier 
in this section to these proposed new MS-DRGs. We believe that, as 
shown in the table below, the distribution of cases and average length 
of stay and average costs of these procedures would be more 
appropriately reflected when these types of procedures are classified 
under these proposed new MS-DRGs.

                         Proposed New MS-DRGs for Other Major Cardiovascular Procedures
----------------------------------------------------------------------------------------------------------------
                                                                    Number  of        Average
                             MS-DRG                                    cases      length of stay  Average  costs
----------------------------------------------------------------------------------------------------------------
Proposed New MS-DRG 270 with MCC................................          14,158             9.3         $33,507
Proposed New MS-DRG 271 with CC.................................           9,648            5.99          22,800
Proposed New MS-DRG 272 without CC/MCC..........................           4,483            3.08          16,438
----------------------------------------------------------------------------------------------------------------

    We are inviting public comments on this proposal and the ICD-10-PCS 
code translations for the less complex, less invasive cardiovascular 
procedures shown earlier in this section, which we also are proposing 
to assign to proposed new MS-DRGs 270, 271, and 272.
    In summary, for FY 2016, we are proposing to delete MS-DRGs 237 and 
238, and to create the following five new MS-DRGs:
     Proposed new MS-DRG 268 (Aortic and Heart Assist 
Procedures Except Pulsation Balloon with MCC);
     Proposed new MS-DRG 269 (Aortic and Heart Assist 
Procedures Except Pulsation Balloon without MCC);
     Proposed new MS-DRG 270 (Other Major Cardiovascular 
Procedures with MCC);
     Proposed new MS-DRG 271 (Other Major Cardiovascular 
Procedures with CC); and
     Proposed new MS-DRG 272 (Other Major Cardiovascular 
Procedures without CC/MCC).
    We also are proposing to assign the more complex, more invasive 
cardiovascular procedures identified in our analysis and the ICD-10-PCS 
code translations to proposed new MS-DRGs

[[Page 24379]]

268 and 269. In addition, we are proposing to assign the less complex, 
less invasive cardiovascular procedures identified in our analysis and 
the ICD-10-PCS code translations to proposed new MS-DRGs 270, 271, and 
272. We encourage public comments on our proposal to create these 
proposed new MS-DRGs, as well as the ICD-10-PCS code translations that 
we are proposing to assign to the corresponding proposed new MS-DRGs.
4. MDC 8 (Diseases and Disorders of the Musculoskeletal System and 
Connective Tissue)
a. Revision of Hip or Knee Replacements: Proposed Revision of ICD-10-
PCS Version 32 Logic
    We received two comments that the logic for ICD-10 MS-DRGs Version 
32 does not work the same as it does for the ICD-9-CM based MS-DRGs 
Version 32 for joint revisions. One of the commenters requested that 
CMS change the MS-DRG structure for joint revisions within the ICD-10 
MS-DRGs 466, 467, and 468 (Revision of Hip or Knee Replacement with 
MCC, with CC, and without CC/MCC, respectively) so that cases that have 
a spacer removed prior to the insertion of a new joint prosthesis are 
assigned to MS-DRG 466, 467, and 468, as is the case with the ICD-9-CM 
MS-DRGs. The other commenter asked that joint revision cases that 
involve knee revisions with cemented and uncemented qualifiers be 
assigned to these MS-DRGs. This commenter provided an example of a 
patient admitted for a knee revision and reported under ICD-10-PCS 
codes 0SPD0JZ (Removal of synthetic substitute from left knee joint, 
open approach) and 0SRU0JA (Replacement of left knee joint, femoral 
surface with synthetic substitute, uncemented, open approach), which 
should be assigned to MS-DRGs 466, 467, and 468. The requestor stated 
that revision cases coded with ICD-9-CM codes are assigned to MS-DRGs 
466, 467, and 468, but similar cases reported with these ICD-10-PCS 
codes are not assigned to MS-DRGs 466, 467, and 468 in ICD-10-PCS MS-
DRGs Version 32.
    We agree that joint revision cases with the removal of a spacer and 
subsequent insertion of a new joint prosthesis should be assigned to 
MS-DRGs 466, 467, and 468 as is the case currently with the ICD-9-CM 
based MS-DRGs Version 32. We also agree that knee revisions that 
involve cemented and uncemented qualifiers should be assigned to MS-
DRGs 466, 467, and 468. Knee revision cases currently reported with 
ICD-9-CM codes are assigned to MS-DRGs 466, 467, and 468 in the ICD-9-
CM based MS-DRGs. We examined joint revision combination codes that are 
not currently assigned to MS-DRGs 466, 467, and 468 in ICD-10 MS-DRGs 
Version 32 and identified additional combinations that also should be 
included so that the joint revision MS-DRGs would have the same logic 
as the ICD-9-CM MS-DRGs. We are proposing to add the following code 
combinations which capture the joint revisions to the Version 33 MS-DRG 
structure for ICD-10 MS-DRGs 466, 467, and 468 that we are proposing to 
implement effective October 1, 2015.

  MS-DRG 466-468 ICD-10-PCS Code Pairs To Be Added to the Version 33 ICD-10 MS-DRGs 466, 467, and 468: Proposed
                                    New Hip Revision ICD-10-PCS Combinations
----------------------------------------------------------------------------------------------------------------
     ICD-10-PCS code           Code description                    ICD-10-PCS code           Code description
----------------------------------------------------------------------------------------------------------------
0SP908Z..................  Removal of spacer from       and   0SR9019..................  Replacement of right
                            right hip joint, open                                         hip joint with metal
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SR901A..................  Replacement of right
                            right hip joint, open                                         hip joint with metal
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SR901Z..................  Replacement of right
                            right hip joint, open                                         hip joint with metal
                            approach.                                                     synthetic substitute,
                                                                                          open approach.
0SP908Z..................  Removal of spacer from       and   0SR9029..................  Replacement of right
                            right hip joint, open                                         hip joint with metal
                            approach.                                                     on polyethylene
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SR902A..................  Replacement of right
                            right hip joint, open                                         hip joint with metal
                            approach.                                                     on polyethylene
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SR902Z..................  Replacement of right
                            right hip joint, open                                         hip joint with metal
                            approach.                                                     on polyethylene
                                                                                          synthetic substitute,
                                                                                          open approach.
0SP908Z..................  Removal of spacer from       and   0SR9039..................  Replacement of right
                            right hip joint, open                                         hip joint with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SR903A..................  Replacement of right
                            right hip joint, open                                         hip joint with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SR903Z..................  Replacement of right
                            right hip joint, open                                         hip joint with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          open approach.
0SP908Z..................  Removal of spacer from       and   0SR9049..................  Replacement of right
                            right hip joint, open                                         hip joint with ceramic
                            approach.                                                     on polyethylene
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SR904A..................  Replacement of right
                            right hip joint, open                                         hip joint with ceramic
                            approach.                                                     on polyethylene
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SR904Z..................  Replacement of right
                            right hip joint, open                                         hip joint with ceramic
                            approach.                                                     on polyethylene
                                                                                          synthetic substitute,
                                                                                          open approach.
0SP908Z..................  Removal of spacer from       and   0SR90J9..................  Replacement of right
                            right hip joint, open                                         hip joint with
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SR90JA..................  Replacement of right
                            right hip joint, open                                         hip joint with
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SR90JZ..................  Replacement of right
                            right hip joint, open                                         hip joint with
                            approach.                                                     synthetic substitute,
                                                                                          open approach.
0SP908Z..................  Removal of spacer from       and   0SRA009..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with
                                                                                          polyethylene synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.

[[Page 24380]]

 
0SP908Z..................  Removal of spacer from       and   0SRA00A..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with
                                                                                          polyethylene synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SRA00Z..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with
                                                                                          polyethylene synthetic
                                                                                          substitute, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SRA019..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with metal
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SRA01A..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with metal
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SRA01Z..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with metal
                                                                                          synthetic substitute,
                                                                                          open approach.
0SP908Z..................  Removal of spacer from       and   0SRA039..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with ceramic
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SRA03A..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with ceramic
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SRA03Z..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with ceramic
                                                                                          synthetic substitute,
                                                                                          open approach.
0SP908Z..................  Removal of spacer from       and   0SRA0J9..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with synthetic
                                                                                          substitute, cemented,
                                                                                          pen approach.
0SP908Z..................  Removal of spacer from       and   0SRA0JA..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SRA0JZ..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with synthetic
                                                                                          substitute, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SRR019..................  Replacement of right
                            right hip joint, open                                         hip joint, femoral
                            approach.                                                     surface with metal
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SRR01A..................  Replacement of right
                            right hip joint, open                                         hip joint, femoral
                            approach.                                                     surface with metal
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SRR01Z..................  Replacement of right
                            right hip joint, open                                         hip joint, femoral
                            approach.                                                     surface with metal
                                                                                          synthetic substitute,
                                                                                          open approach.
0SP908Z..................  Removal of spacer from       and   0SRR039..................  Replacement of right
                            right hip joint, open                                         hip joint, femoral
                            approach.                                                     surface with ceramic
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SRR03A..................  Replacement of right
                            right hip joint, open                                         hip joint, femoral
                            approach.                                                     surface with ceramic
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SRR03Z..................  Replacement of right
                            right hip joint, open                                         hip joint, femoral
                            approach.                                                     surface with ceramic
                                                                                          synthetic substitute,
                                                                                          open approach.
0SP908Z..................  Removal of spacer from       and   0SRR0J9..................  Replacement of right
                            right hip joint, open                                         hip joint, femoral
                            approach.                                                     surface with synthetic
                                                                                          Substitute, cemented,
                                                                                          open approach.
0SP908Z..................  Removal of spacer from       and   0SRR0JA..................  Replacement of right
                            right hip joint, open                                         hip joint, femoral
                            approach.                                                     surface with synthetic
                                                                                          Substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SRR0JZ..................  Replacement of right
                            right hip joint, open                                         hip joint, femoral
                            approach.                                                     surface with synthetic
                                                                                          substitute, open
                                                                                          approach.
0SP908Z..................  Removal of spacer from       and   0SU909Z..................  Supplement right hip
                            right hip joint, open                                         joint with liner, open
                            approach.                                                     approach.
0SP908Z..................  Removal of spacer from       and   0SUA09Z..................  Supplement right hip
                            right hip joint, open                                         joint, acetabular
                            approach.                                                     surface with liner,
                                                                                          open approach.
0SP908Z..................  Removal of spacer from       and   0SUR09Z..................  Supplement right hip
                            right hip joint, open                                         joint, femoral surface
                            approach.                                                     with liner, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SR9019..................  Replacement of right
                            right hip joint, open                                         hip joint with metal
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SR901A..................  Replacement of right
                            right hip joint, open                                         hip joint with metal
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SR901Z..................  Replacement of right
                            right hip joint, open                                         hip joint with metal
                            approach.                                                     synthetic substitute,
                                                                                          open approach.
0SP909Z..................  Removal of liner from        and   0SR9029..................  Replacement of right
                            right hip joint, open                                         hip joint with metal
                            approach.                                                     on polyethylene
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.

[[Page 24381]]

 
0SP909Z..................  Removal of liner from        and   0SR902A..................  Replacement of right
                            right hip joint, open                                         hip joint with metal
                            approach.                                                     on polyethylene
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SR902Z..................  Replacement of right
                            right hip joint, open                                         hip joint with metal
                            approach.                                                     on polyethylene
                                                                                          synthetic substitute,
                                                                                          open approach.
0SP909Z..................  Removal of liner from        and   0SR9039..................  Replacement of right
                            right hip joint, open                                         hip joint with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SR903A..................  Replacement of right
                            right hip joint, open                                         hip joint with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SR903Z..................  Replacement of right
                            right hip joint, open                                         hip joint with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          open approach.
0SP909Z..................  Removal of liner from        and   0SR9049..................  Replacement of right
                            right hip joint, open                                         hip joint with ceramic
                            approach.                                                     on polyethylene
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SR904A..................  Replacement of right
                            right hip joint, open                                         hip joint with ceramic
                            approach.                                                     on polyethylene
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SR904Z..................  Replacement of right
                            right hip joint, open                                         hip joint with ceramic
                            approach.                                                     on polyethylene
                                                                                          synthetic substitute,
                                                                                          open approach.
0SP909Z..................  Removal of liner from        and   0SR90J9..................  Replacement of right
                            right hip joint, open                                         hip joint with
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SR90JA..................  Replacement of right
                            right hip joint, open                                         hip joint with
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SR90JZ..................  Replacement of right
                            right hip joint, open                                         hip joint with
                            approach.                                                     synthetic substitute,
                                                                                          open approach.
0SP909Z..................  Removal of liner from        and   0SRA009..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with
                                                                                          polyethylene synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SP909Z..................  Removal of liner from        and   0SRA00A..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with
                                                                                          polyethylene synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SRA00Z..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with
                                                                                          polyethylene synthetic
                                                                                          substitute, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SRA019..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with metal
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SRA01A..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with metal
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SRA01Z..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with metal
                                                                                          synthetic substitute,
                                                                                          open approach.
0SP909Z..................  Removal of liner from        and   0SRA039..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with ceramic
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SRA03A..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with ceramic
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SRA03Z..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with ceramic
                                                                                          synthetic substitute,
                                                                                          open approach.
0SP909Z..................  Removal of liner from        and   0SRA0J9..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SP909Z..................  Removal of liner from        and   0SRA0JA..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SRA0JZ..................  Replacement of right
                            right hip joint, open                                         hip joint, acetabular
                            approach.                                                     surface with synthetic
                                                                                          substitute, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SRR019..................  Replacement of right
                            right hip joint, open                                         hip joint, femoral
                            approach.                                                     surface with metal
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SRR01A..................  Replacement of right
                            right hip joint, open                                         hip joint, femoral
                            approach.                                                     surface with metal
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SRR01Z..................  Replacement of right
                            right hip joint, open                                         hip joint, femoral
                            approach.                                                     surface with metal
                                                                                          synthetic substitute,
                                                                                          open approach.

[[Page 24382]]

 
0SP909Z..................  Removal of liner from        and   0SRR039..................  Replacement of right
                            right hip joint, open                                         hip joint, femoral
                            approach.                                                     surface with ceramic
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SRR03A..................  Replacement of right
                            right hip joint, open                                         hip joint, femoral
                            approach.                                                     surface with ceramic
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SRR03Z..................  Replacement of right
                            right hip joint, open                                         hip joint, femoral
                            approach.                                                     surface with ceramic
                                                                                          synthetic substitute,
                                                                                          open approach.
0SP909Z..................  Removal of liner from        and   0SRR0J9..................  Replacement of right
                            right hip joint, open                                         hip joint, femoral
                            approach.                                                     surface with synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SP909Z..................  Removal of liner from        and   0SRR0JA..................  Replacement of right
                            right hip joint, open                                         hip joint, femoral
                            approach.                                                     surface with synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SRR0JZ..................  Replacement of right
                            right hip joint, open                                         hip joint, femoral
                            approach.                                                     surface with synthetic
                                                                                          substitute, open
                                                                                          approach.
0SP909Z..................  Removal of liner from        and   0SU909Z..................  Supplement right hip
                            right hip joint, open                                         joint with liner, open
                            approach.                                                     approach.
0SP909Z..................  Removal of liner from        and   0SUA09Z..................  Supplement right hip
                            right hip joint, open                                         joint, acetabular
                            approach.                                                     surface with liner,
                                                                                          open approach.
0SP909Z..................  Removal of liner from        and   0SUR09Z..................  Supplement right hip
                            right hip joint, open                                         joint, femoral surface
                            approach.                                                     with liner, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SR9019..................  Replacement of right
                            device from right hip                                         hip joint with metal
                            joint, open approach.                                         synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SR901A..................  Replacement of right
                            device from right hip                                         hip joint with metal
                            joint, open approach.                                         synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SR901Z..................  Replacement of right
                            device from right hip                                         hip joint with metal
                            joint, open approach.                                         synthetic substitute,
                                                                                          open approach.
0SP90BZ..................  Removal of resurfacing       and   0SR9029..................  Replacement of right
                            device from right hip                                         hip joint with metal
                            joint, open approach.                                         on polyethylene
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SR902A..................  Replacement of right
                            device from right hip                                         hip joint with metal
                            joint, open approach.                                         on polyethylene
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SR902Z..................  Replacement of right
                            device from right hip                                         hip joint with metal
                            joint, open approach.                                         on polyethylene
                                                                                          synthetic substitute,
                                                                                          open approach.
0SP90BZ..................  Removal of resurfacing       and   0SR9039..................  Replacement of right
                            device from right hip                                         hip joint with ceramic
                            joint, open approach.                                         synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SR903A..................  Replacement of right
                            device from right hip                                         hip joint with ceramic
                            joint, open approach.                                         synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SR903Z..................  Replacement of right
                            device from right hip                                         hip joint with ceramic
                            joint, open approach.                                         synthetic substitute,
                                                                                          open approach.
0SP90BZ..................  Removal of resurfacing       and   0SR9049..................  Replacement of right
                            device from right hip                                         hip joint with ceramic
                            joint, open approach.                                         on polyethylene
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SR904A..................  Replacement of right
                            device from right hip                                         hip joint with ceramic
                            joint, open approach.                                         on polyethylene
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SR904Z..................  Replacement of right
                            device from right hip                                         hip joint with ceramic
                            joint, open approach.                                         on polyethylene
                                                                                          synthetic substitute,
                                                                                          open approach.
0SP90BZ..................  Removal of resurfacing       and   0SR90J9..................  Replacement of right
                            device from right hip                                         hip joint with
                            joint, open approach.                                         synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SR90JA..................  Replacement of right
                            device from right hip                                         hip joint with
                            joint, open approach.                                         synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SR90JZ..................  Replacement of right
                            device from right hip                                         hip joint with
                            joint, open approach.                                         synthetic substitute,
                                                                                          open approach.
0SP90BZ..................  Removal of resurfacing       and   0SRA009..................  Replacement of right
                            device from right hip                                         hip joint, acetabular
                            joint, open approach.                                         surface with
                                                                                          polyethylene synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SP90BZ..................  Removal of resurfacing       and   0SRA00A..................  Replacement of right
                            device from right hip                                         hip joint, acetabular
                            joint, open approach.                                         surface with
                                                                                          polyethylene synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SRA00Z..................  Replacement of right
                            device from right hip                                         hip joint, acetabular
                            joint, open approach.                                         surface with
                                                                                          polyethylene synthetic
                                                                                          substitute, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SRA019..................  Replacement of right
                            device from right hip                                         hip joint, acetabular
                            joint, open approach.                                         surface with metal
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SRA01A..................  Replacement of right
                            device from right hip                                         hip joint, acetabular
                            joint, open approach.                                         surface with metal
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.

[[Page 24383]]

 
0SP90BZ..................  Removal of resurfacing       and   0SRA01Z..................  Replacement of right
                            device from right hip                                         hip joint, acetabular
                            joint, open approach.                                         surface with metal
                                                                                          synthetic substitute,
                                                                                          open approach.
0SP90BZ..................  Removal of resurfacing       and   0SRA039..................  Replacement of right
                            device from right hip                                         hip joint, acetabular
                            joint, open approach.                                         surface with ceramic
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SRA03A..................  Replacement of right
                            device from right hip                                         hip joint, acetabular
                            joint, open approach.                                         surface with ceramic
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SRA03Z..................  Replacement of right
                            device from right hip                                         hip joint, acetabular
                            joint, open approach.                                         surface with ceramic
                                                                                          synthetic substitute,
                                                                                          open approach.
0SP90BZ..................  Removal of resurfacing       and   0SRA0J9..................  Replacement of right
                            device from right hip                                         hip joint, acetabular
                            joint, open approach.                                         surface with synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SP90BZ..................  Removal of resurfacing       and   0SRA0JA..................  Replacement of right
                            device from right hip                                         hip joint, acetabular
                            joint, open approach.                                         surface with synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SRA0JZ..................  Replacement of right
                            device from right hip                                         hip joint, acetabular
                            joint, open approach.                                         Surface with synthetic
                                                                                          substitute, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SRR019..................  Replacement of right
                            device from right hip                                         hip joint, femoral
                            joint, open approach.                                         surface with metal
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SRR01A..................  Replacement of right
                            device from right hip                                         hip joint, femoral
                            joint, open approach.                                         surface with metal
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SRR01Z..................  Replacement of right
                            device from right hip                                         hip joint, femoral
                            joint, open approach.                                         surface with metal
                                                                                          synthetic substitute,
                                                                                          open approach.
0SP90BZ..................  Removal of resurfacing       and   0SRR039..................  Replacement of right
                            device from right hip                                         hip joint, femoral
                            joint, open approach.                                         surface with ceramic
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SRR03A..................  Replacement of right
                            device from right hip                                         hip joint, femoral
                            joint, open approach.                                         surface with ceramic
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SRR03Z..................  Replacement of right
                            device from right hip                                         hip joint, femoral
                            joint, open approach.                                         surface with ceramic
                                                                                          synthetic substitute,
                                                                                          open approach.
0SP90BZ..................  Removal of resurfacing       and   0SRR0J9..................  Replacement of right
                            device from right hip                                         hip joint, femoral
                            joint, open approach.                                         surface with synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SP90BZ..................  Removal of resurfacing       and   0SRR0JA..................  Replacement of right
                            device from right hip                                         hip joint, femoral
                            joint, open approach.                                         surface with synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SRR0JZ..................  Replacement of right
                            device from right hip                                         hip joint, femoral
                            joint, open approach.                                         surface with synthetic
                                                                                          substitute, open
                                                                                          approach.
0SP90BZ..................  Removal of resurfacing       and   0SU909Z..................  Supplement right hip
                            device from right hip                                         joint with liner, open
                            joint, open approach.                                         approach.
0SP90BZ..................  Removal of resurfacing       and   0SUA09Z..................  Supplement right hip
                            device from right hip                                         joint, acetabular
                            joint, open approach.                                         surface with liner,
                                                                                          open approach.
0SP90BZ..................  Removal of resurfacing       and   0SUR09Z..................  Supplement right hip
                            device from right hip                                         joint, femoral surface
                            joint, open approach.                                         with liner, open
                                                                                          approach.
0SP90JZ..................  Removal of synthetic         and   0SR9049..................  Replacement of right
                            substitute from right                                         hip joint with ceramic
                            hip joint, open                                               on polyethylene
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP90JZ..................  Removal of synthetic         and   0SR904A..................  Replacement of right
                            substitute from right                                         hip joint with ceramic
                            hip joint, open                                               on polyethylene
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP90JZ..................  Removal of synthetic         and   0SR904Z..................  Replacement of right
                            substitute from right                                         hip joint with ceramic
                            hip joint, open                                               on polyethylene
                            approach.                                                     synthetic substitute,
                                                                                          open approach.
0SP948Z..................  Removal of spacer from       and   0SR9019..................  Replacement of right
                            right hip joint,                                              hip joint with metal
                            percutaneous endoscopic                                       synthetic substitute,
                            approach.                                                     cemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SR901A..................  Replacement of right
                            right hip joint,                                              hip joint with metal
                            percutaneous endoscopic                                       synthetic substitute,
                            approach.                                                     uncemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SR901Z..................  Replacement of right
                            right hip joint,                                              hip joint with metal
                            percutaneous endoscopic                                       synthetic substitute,
                            approach.                                                     open approach.
0SP948Z..................  Removal of spacer from       and   0SR9029..................  Replacement of right
                            right hip joint,                                              hip joint with metal
                            percutaneous endoscopic                                       on polyethylene
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SR902A..................  Replacement of right
                            right hip joint,                                              hip joint with metal
                            percutaneous endoscopic                                       on polyethylene
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SR902Z..................  Replacement of right
                            right hip joint,                                              hip joint with metal
                            percutaneous endoscopic                                       on polyethylene
                            approach.                                                     synthetic substitute,
                                                                                          open approach.

[[Page 24384]]

 
0SP948Z..................  Removal of spacer from       and   0SR9039..................  Replacement of right
                            right hip joint,                                              hip joint with ceramic
                            percutaneous endoscopic                                       synthetic substitute,
                            approach.                                                     cemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SR903A..................  Replacement of right
                            right hip joint,                                              hip joint with ceramic
                            percutaneous endoscopic                                       synthetic substitute,
                            approach.                                                     uncemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SR903Z..................  Replacement of right
                            right hip joint,                                              hip joint with ceramic
                            percutaneous endoscopic                                       synthetic substitute,
                            approach.                                                     open approach.
0SP948Z..................  Removal of spacer from       and   0SR9049..................  Replacement of right
                            right hip joint,                                              hip joint with ceramic
                            percutaneous endoscopic                                       on polyethylene
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SR904A..................  Replacement of right
                            right hip joint,                                              hip joint with ceramic
                            percutaneous endoscopic                                       on polyethylene
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SR904Z..................  Replacement of right
                            right hip joint,                                              hip joint with ceramic
                            percutaneous endoscopic                                       on polyethylene
                            approach.                                                     synthetic substitute,
                                                                                          open approach.
0SP948Z..................  Removal of spacer from       and   0SR90J9..................  Replacement of right
                            right hip joint,                                              hip joint with
                            percutaneous endoscopic                                       synthetic substitute,
                            approach.                                                     cemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SR90JA..................  Replacement of right
                            right hip joint,                                              hip joint with
                            percutaneous endoscopic                                       synthetic substitute,
                            approach.                                                     uncemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SR90JZ..................  Replacement of right
                            right hip joint,                                              hip joint with
                            percutaneous endoscopic                                       synthetic substitute,
                            approach.                                                     open approach.
0SP948Z..................  Removal of spacer from       and   0SRA009..................  Replacement of right
                            right hip joint,                                              hip joint, acetabular
                            percutaneous endoscopic                                       surface with
                            approach.                                                     polyethylene synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SP948Z..................  Removal of spacer from       and   0SRA00A..................  Replacement of right
                            right hip joint,                                              hip joint, acetabular
                            percutaneous endoscopic                                       surface with
                            approach.                                                     polyethylene synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SRA00Z..................  Replacement of right
                            right hip joint,                                              hip joint, acetabular
                            percutaneous endoscopic                                       surface with
                            approach.                                                     polyethylene synthetic
                                                                                          substitute, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SRA019..................  Replacement of right
                            right hip joint,                                              hip joint, acetabular
                            percutaneous endoscopic                                       surface with metal
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SRA01A..................  Replacement of right
                            right hip joint,                                              hip joint, acetabular
                            percutaneous endoscopic                                       Surface with metal
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SRA01Z..................  Replacement of right
                            right hip joint,                                              hip joint, acetabular
                            percutaneous endoscopic                                       surface with metal
                            approach.                                                     synthetic substitute,
                                                                                          open approach.
0SP948Z..................  Removal of spacer from       and   0SRA039..................  Replacement of right
                            right hip joint,                                              hip joint, acetabular
                            percutaneous endoscopic                                       surface with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SRA03A..................  Replacement of right
                            right hip joint,                                              hip joint, acetabular
                            percutaneous endoscopic                                       surface with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SRA03Z..................  Replacement of right
                            right hip joint,                                              hip joint, acetabular
                            percutaneous endoscopic                                       surface with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          open approach.
0SP948Z..................  Removal of spacer from       and   0SRA0J9..................  Replacement of right
                            right hip joint,                                              hip joint, acetabular
                            percutaneous endoscopic                                       surface with synthetic
                            approach.                                                     substitute, cemented,
                                                                                          open approach.
0SP948Z..................  Removal of spacer from       and   0SRA0JA..................  Replacement of right
                            right hip joint,                                              hip joint, acetabular
                            percutaneous endoscopic                                       surface with synthetic
                            approach.                                                     substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SRA0JZ..................  Replacement of right
                            right hip joint,                                              hip joint, acetabular
                            percutaneous endoscopic                                       surface with synthetic
                            approach.                                                     substitute, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SRR019..................  Replacement of right
                            right hip joint,                                              hip joint, femoral
                            percutaneous endoscopic                                       surface with metal
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SRR01A..................  Replacement of right
                            right hip joint,                                              hip joint, femoral
                            percutaneous endoscopic                                       surface with metal
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SRR01Z..................  Replacement of right
                            right hip joint,                                              hip joint, femoral
                            percutaneous endoscopic                                       surface with metal
                            approach.                                                     synthetic substitute,
                                                                                          open approach.
0SP948Z..................  Removal of spacer from       and   0SRR039..................  Replacement of right
                            right hip joint,                                              hip joint, femoral
                            percutaneous endoscopic                                       surface with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SRR03A..................  Replacement of right
                            right hip joint,                                              hip joint, femoral
                            percutaneous endoscopic                                       surface with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.

[[Page 24385]]

 
0SP948Z..................  Removal of spacer from       and   0SRR03Z..................  Replacement of right
                            right hip joint,                                              hip joint, femoral
                            percutaneous endoscopic                                       surface with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          open approach.
0SP948Z..................  Removal of spacer from       and   0SRR0J9..................  Replacement of right
                            right hip joint,                                              hip joint, femoral
                            percutaneous endoscopic                                       surface with synthetic
                            approach.                                                     substitute, cemented,
                                                                                          open approach.
0SP948Z..................  Removal of spacer from       and   0SRR0JA..................  Replacement of right
                            right hip joint,                                              hip joint, femoral
                            percutaneous endoscopic                                       surface with synthetic
                            approach.                                                     substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SRR0JZ..................  Replacement of right
                            right hip joint,                                              hip joint, femoral
                            percutaneous endoscopic                                       surface with synthetic
                            approach.                                                     substitute, open
                                                                                          approach.
0SP948Z..................  Removal of spacer from       and   0SU909Z..................  Supplement right hip
                            right hip joint,                                              joint with liner, open
                            percutaneous endoscopic                                       approach.
                            approach.
0SP948Z..................  Removal of spacer from       and   0SUA09Z..................  Supplement right hip
                            right hip joint,                                              joint, acetabular
                            percutaneous endoscopic                                       surface with liner,
                            approach.                                                     open approach.
0SP948Z..................  Removal of spacer from       and   0SUR09Z..................  Supplement right hip
                            right hip joint,                                              joint, femoral surface
                            percutaneous endoscopic                                       with liner, open
                            approach.                                                     approach.
0SP94JZ..................  Removal of synthetic         and   0SR9019..................  Replacement of right
                            substitute from right                                         hip joint with metal
                            hip joint, percutaneous                                       synthetic substitute,
                            endoscopic approach.                                          cemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SR901A..................  Replacement of right
                            substitute from right                                         hip joint with metal
                            hip joint, percutaneous                                       synthetic substitute,
                            endoscopic approach.                                          uncemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SR901Z..................  Replacement of right
                            substitute from right                                         hip joint with metal
                            hip joint, percutaneous                                       synthetic substitute,
                            endoscopic approach.                                          open approach.
0SP94JZ..................  Removal of synthetic         and   0SR9029..................  Replacement of right
                            substitute from right                                         hip joint with metal
                            hip joint, percutaneous                                       on polyethylene
                            endoscopic approach.                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SR902A..................  Replacement of right
                            substitute from right                                         hip joint with metal
                            hip joint, percutaneous                                       on polyethylene
                            endoscopic approach.                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SR902Z..................  Replacement of right
                            substitute from right                                         hip joint with metal
                            hip joint, percutaneous                                       on polyethylene
                            endoscopic approach.                                          synthetic substitute,
                                                                                          open approach.
0SP94JZ..................  Removal of synthetic         and   0SR9039..................  Replacement of right
                            substitute from right                                         hip joint with ceramic
                            hip joint, percutaneous                                       synthetic substitute,
                            endoscopic approach.                                          cemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SR903A..................  Replacement of right
                            substitute from right                                         hip joint with ceramic
                            hip joint, percutaneous                                       synthetic substitute,
                            endoscopic approach.                                          uncemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SR903Z..................  Replacement of right
                            substitute from right                                         hip joint with ceramic
                            hip joint, percutaneous                                       synthetic substitute,
                            endoscopic approach.                                          open approach.
0SP94JZ..................  Removal of synthetic         and   0SR9049..................  Replacement of right
                            substitute from right                                         hip joint with ceramic
                            hip joint, percutaneous                                       on polyethylene
                            endoscopic approach.                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SR904A..................  Replacement of right
                            substitute from right                                         hip joint with ceramic
                            hip joint, percutaneous                                       on polyethylene
                            endoscopic approach.                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SR904Z..................  Replacement of right
                            substitute from right                                         hip joint with ceramic
                            hip joint, percutaneous                                       on polyethylene
                            endoscopic approach.                                          synthetic substitute,
                                                                                          open approach.
0SP94JZ..................  Removal of synthetic         and   0SR90J9..................  Replacement of right
                            substitute from right                                         hip joint with
                            hip joint, percutaneous                                       synthetic substitute,
                            endoscopic approach.                                          cemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SR90JA..................  Replacement of right
                            substitute from right                                         hip joint with
                            hip joint, percutaneous                                       synthetic substitute,
                            endoscopic approach.                                          uncemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SR90JZ..................  Replacement of right
                            substitute from right                                         hip joint with
                            hip joint, percutaneous                                       synthetic substitute,
                            endoscopic approach.                                          open approach.
0SP94JZ..................  Removal of synthetic         and   0SRA009..................  Replacement of right
                            substitute from right                                         hip joint, acetabular
                            hip joint, percutaneous                                       surface with
                            endoscopic approach.                                          polyethylene synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SP94JZ..................  Removal of synthetic         and   0SRA00A..................  Replacement of right
                            substitute from right                                         hip joint, acetabular
                            hip joint, percutaneous                                       surface with
                            endoscopic approach.                                          polyethylene synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SRA00Z..................  Replacement of right
                            substitute from right                                         hip joint, acetabular
                            hip joint, percutaneous                                       surface with
                            endoscopic approach.                                          polyethylene synthetic
                                                                                          substitute, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SRA019..................  Replacement of right
                            substitute from right                                         hip joint, acetabular
                            hip joint, percutaneous                                       surface with metal
                            endoscopic approach.                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SRA01A..................  Replacement of right
                            substitute from right                                         hip joint, acetabular
                            hip joint, percutaneous                                       surface with metal
                            endoscopic approach.                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SRA01Z..................  Replacement of right
                            substitute from right                                         hip joint, acetabular
                            hip joint, percutaneous                                       surface with metal
                            endoscopic approach.                                          synthetic substitute,
                                                                                          open approach.
0SP94JZ..................  Removal of synthetic         and   0SRA039..................  Replacement of right
                            substitute from right                                         hip joint, acetabular
                            hip joint, percutaneous                                       surface with ceramic
                            endoscopic approach.                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.

[[Page 24386]]

 
0SP94JZ..................  Removal of synthetic         and   0SRA03A..................  Replacement of right
                            substitute from right                                         hip joint, acetabular
                            hip joint, percutaneous                                       surface with ceramic
                            endoscopic approach.                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SRA03Z..................  Replacement of right
                            substitute from right                                         hip joint, acetabular
                            hip joint, percutaneous                                       surface with ceramic
                            endoscopic approach.                                          synthetic substitute,
                                                                                          open approach.
0SP94JZ..................  Removal of synthetic         and   0SRA0J9..................  Replacement of right
                            substitute from right                                         hip joint, acetabular
                            hip joint, percutaneous                                       surface with synthetic
                            endoscopic approach.                                          substitute, cemented,
                                                                                          open approach.
0SP94JZ..................  Removal of synthetic         and   0SRA0JA..................  Replacement of right
                            substitute from right                                         hip joint, acetabular
                            hip joint, percutaneous                                       surface with synthetic
                            endoscopic approach.                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SRA0JZ..................  Replacement of right
                            substitute from right                                         hip joint, acetabular
                            hip joint, percutaneous                                       surface with synthetic
                            endoscopic approach.                                          substitute, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SRR019..................  Replacement of right
                            substitute from right                                         hip joint, femoral
                            hip joint, percutaneous                                       surface with metal
                            endoscopic approach.                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SRR01A..................  Replacement of right
                            substitute from right                                         hip joint, femoral
                            hip joint, percutaneous                                       surface with metal
                            endoscopic approach.                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SRR01Z..................  Replacement of right
                            substitute from right                                         hip joint, femoral
                            hip joint, percutaneous                                       surface with metal
                            endoscopic approach.                                          synthetic substitute,
                                                                                          open approach.
0SP94JZ..................  Removal of synthetic         and   0SRR039..................  Replacement of right
                            substitute from right                                         hip joint, femoral
                            hip joint, percutaneous                                       surface with ceramic
                            endoscopic approach.                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SRR03A..................  Replacement of right
                            substitute from right                                         hip joint, femoral
                            hip joint, percutaneous                                       surface with ceramic
                            endoscopic approach.                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SRR03Z..................  Replacement of right
                            substitute from right                                         hip joint, femoral
                            hip joint, percutaneous                                       surface with ceramic
                            endoscopic approach.                                          synthetic substitute,
                                                                                          open approach.
0SP94JZ..................  Removal of synthetic         and   0SRR0J9..................  Replacement of right
                            substitute from right                                         hip joint, femoral
                            hip joint, percutaneous                                       surface with synthetic
                            endoscopic approach.                                          substitute, cemented,
                                                                                          open approach.
0SP94JZ..................  Removal of synthetic         and   0SRR0JA..................  Replacement of right
                            substitute from right                                         hip joint, femoral
                            hip joint, percutaneous                                       surface with synthetic
                            endoscopic approach.                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SRR0JZ..................  Replacement of right
                            substitute from right                                         hip joint, femoral
                            hip joint, percutaneous                                       surface with synthetic
                            endoscopic approach.                                          substitute, open
                                                                                          approach.
0SP94JZ..................  Removal of synthetic         and   0SU909Z..................  Supplement right hip
                            substitute from right                                         joint with liner, open
                            hip joint, percutaneous                                       approach.
                            endoscopic approach.
0SP94JZ..................  Removal of synthetic         and   0SUA09Z..................  Supplement right hip
                            substitute from right                                         joint, acetabular
                            hip joint, percutaneous                                       surface with liner,
                            endoscopic approach.                                          open approach.
0SP94JZ..................  Removal of synthetic         and   0SUR09Z..................  Supplement right hip
                            substitute from right                                         joint, femoral surface
                            hip joint, percutaneous                                       with liner, open
                            endoscopic approach.                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRB019..................  Replacement of left hip
                            left hip joint, open                                          joint with metal
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRB01A..................  Replacement of left hip
                            left hip joint, open                                          joint with metal
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRB01Z..................  Replacement of left hip
                            left hip joint, open                                          joint with metal
                            approach.                                                     synthetic substitute,
                                                                                          open approach.
0SPB08Z..................  Removal of spacer from       and   0SRB029..................  Replacement of left hip
                            left hip joint, open                                          joint with metal on
                            approach.                                                     polyethylene synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB08Z..................  Removal of spacer from       and   0SRB02A..................  Replacement of left hip
                            left hip joint, open                                          joint with metal on
                            approach.                                                     polyethylene synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRB02Z..................  Replacement of left hip
                            left hip joint, open                                          joint with metal on
                            approach.                                                     polyethylene synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRB039..................  Replacement of left hip
                            left hip joint, open                                          joint with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRB03A..................  Replacement of left hip
                            left hip joint, open                                          joint with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRB03Z..................  Replacement of left hip
                            left hip joint, open                                          joint with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          open approach.
0SPB08Z..................  Removal of spacer from       and   0SRB049..................  Replacement of left hip
                            left hip joint, open                                          joint with ceramic on
                            approach.                                                     polyethylene synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB08Z..................  Removal of spacer from       and   0SRB04A..................  Replacement of left hip
                            left hip joint, open                                          joint with ceramic on
                            approach.                                                     polyethylene synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.

[[Page 24387]]

 
0SPB08Z..................  Removal of spacer from       and   0SRB04Z..................  Replacement of left hip
                            left hip joint, open                                          joint with ceramic on
                            approach.                                                     polyethylene synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRB0J9..................  Replacement of left hip
                            left hip joint, open                                          joint with synthetic
                            approach.                                                     substitute, cemented,
                                                                                          open approach.
0SPB08Z..................  Removal of spacer from       and   0SRB0JA..................  Replacement of left hip
                            left hip joint, open                                          joint with synthetic
                            approach.                                                     substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRB0JZ..................  Replacement of left hip
                            left hip joint, open                                          joint with synthetic
                            approach.                                                     substitute, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRE009..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with
                                                                                          polyethylene synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB08Z..................  Removal of spacer from       and   0SRE00A..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with
                                                                                          polyethylene synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRE00Z..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with
                                                                                          polyethylene synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRE019..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with metal
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRE01A..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with metal
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRE01Z..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with metal
                                                                                          synthetic substitute,
                                                                                          open approach.
0SPB08Z..................  Removal of spacer from       and   0SRE039..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with ceramic
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRE03A..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with ceramic
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRE03Z..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with ceramic
                                                                                          synthetic substitute,
                                                                                          open approach.
0SPB08Z..................  Removal of spacer from       and   0SRE0J9..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB08Z..................  Removal of spacer from       and   0SRE0JA..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRE0JZ..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRS019..................  Replacement of left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with metal synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB08Z..................  Removal of spacer from       and   0SRS01A..................  Replacement of left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with metal synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRS01Z..................  Replacement of left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with metal synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRS039..................  Replacement of left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with ceramic synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB08Z..................  Removal of spacer from       and   0SRS03A..................  Replacement of left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with ceramic synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRS03Z..................  Replacement of left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with ceramic synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRS0J9..................  Replacement of left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB08Z..................  Removal of spacer from       and   0SRS0JA..................  Replacement of left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SRS0JZ..................  Replacement of left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB08Z..................  Removal of spacer from       and   0SUB09Z..................  Supplement left hip
                            left hip joint, open                                          joint with liner, open
                            approach.                                                     approach.
0SPB08Z..................  Removal of spacer from       and   0SUE09Z..................  Supplement left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with liner,
                                                                                          open approach.

[[Page 24388]]

 
0SPB08Z..................  Removal of spacer from       and   0SUS09Z..................  Supplement left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with liner, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRB019..................  Replacement of left hip
                            left hip joint, open                                          joint with metal
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRB01A..................  Replacement of left hip
                            left hip joint, open                                          joint with metal
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRB01Z..................  Replacement of left hip
                            left hip joint, open                                          joint with metal
                            approach.                                                     synthetic substitute,
                                                                                          open approach.
0SPB09Z..................  Removal of liner from        and   0SRB029..................  Replacement of left hip
                            left hip joint, open                                          joint with metal on
                            approach.                                                     polyethylene synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB09Z..................  Removal of liner from        and   0SRB02A..................  Replacement of left hip
                            left hip joint, open                                          joint with metal on
                            approach.                                                     polyethylene synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRB02Z..................  Replacement of left hip
                            left hip joint, open                                          joint with metal on
                            approach.                                                     polyethylene synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRB039..................  Replacement of left hip
                            left hip joint, open                                          joint with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRB03A..................  Replacement of left hip
                            left hip joint, open                                          joint with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRB03Z..................  Replacement of left hip
                            left hip joint, open                                          joint with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          open approach.
0SPB09Z..................  Removal of liner from        and   0SRB049..................  Replacement of left hip
                            left hip joint, open                                          joint with ceramic on
                            approach.                                                     polyethylene synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB09Z..................  Removal of liner from        and   0SRB04A..................  Replacement of left hip
                            left hip joint, open                                          joint with ceramic on
                            approach.                                                     polyethylene synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRB04Z..................  Replacement of left hip
                            left hip joint, open                                          joint with ceramic on
                            approach.                                                     polyethylene synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRB0J9..................  Replacement of left hip
                            left hip joint, open                                          joint with synthetic
                            approach.                                                     substitute, cemented,
                                                                                          open approach.
0SPB09Z..................  Removal of liner from        and   0SRB0JA..................  Replacement of left hip
                            left hip joint, open                                          joint with synthetic
                            approach.                                                     substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRB0JZ..................  Replacement of left hip
                            left hip joint, open                                          joint with synthetic
                            approach.                                                     substitute, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRE009..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with
                                                                                          polyethylene synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB09Z..................  Removal of liner from        and   0SRE00A..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with
                                                                                          polyethylene synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRE00Z..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with
                                                                                          polyethylene synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRE019..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with metal
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRE01A..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with metal
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRE01Z..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with metal
                                                                                          synthetic substitute,
                                                                                          open approach.
0SPB09Z..................  Removal of liner from        and   0SRE039..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with ceramic
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRE03A..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with ceramic
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRE03Z..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with ceramic
                                                                                          synthetic substitute,
                                                                                          open approach.
0SPB09Z..................  Removal of liner from        and   0SRE0J9..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB09Z..................  Removal of liner from        and   0SRE0JA..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRE0JZ..................  Replacement of left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with synthetic
                                                                                          substitute, open
                                                                                          approach.

[[Page 24389]]

 
0SPB09Z..................  Removal of liner from        and   0SRS019..................  Replacement of left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with metal synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB09Z..................  Removal of liner from        and   0SRS01A..................  Replacement of left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with metal synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRS01Z..................  Replacement of left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with metal synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRS039..................  Replacement of left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with ceramic synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB09Z..................  Removal of liner from        and   0SRS03A..................  Replacement of left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with ceramic synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRS03Z..................  Replacement of left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with ceramic synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRS0J9..................  Replacement of left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB09Z..................  Removal of liner from        and   0SRS0JA..................  Replacement of left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SRS0JZ..................  Replacement of left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB09Z..................  Removal of liner from        and   0SUB09Z..................  Supplement left hip
                            left hip joint, open                                          joint with liner, open
                            approach.                                                     approach.
0SPB09Z..................  Removal of liner from        and   0SUE09Z..................  Supplement left hip
                            left hip joint, open                                          joint, acetabular
                            approach.                                                     surface with liner,
                                                                                          open approach.
0SPB09Z..................  Removal of liner from        and   0SUS09Z..................  Supplement left hip
                            left hip joint, open                                          joint, femoral surface
                            approach.                                                     with liner, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRB019..................  Replacement of left hip
                            device from left hip                                          joint with metal
                            joint, open approach.                                         synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRB01A..................  Replacement of left hip
                            device from left hip                                          joint with metal
                            joint, open approach.                                         synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRB01Z..................  Replacement of left hip
                            device from left hip                                          joint with metal
                            joint, open approach.                                         synthetic substitute,
                                                                                          open approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRB029..................  Replacement of left hip
                            device from left hip                                          joint with metal on
                            joint, open approach.                                         polyethylene synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRB02A..................  Replacement of left hip
                            device from left hip                                          joint with metal on
                            joint, open approach.                                         polyethylene synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRB02Z..................  Replacement of left hip
                            device from left hip                                          joint with metal on
                            joint, open approach.                                         polyethylene synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRB039..................  Replacement of left hip
                            device from left hip                                          joint with ceramic
                            joint, open approach.                                         synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRB03A..................  Replacement of left hip
                            device from left hip                                          joint with ceramic
                            joint, open approach.                                         synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRB03Z..................  Replacement of left hip
                            device from left hip                                          joint with ceramic
                            joint, open approach.                                         synthetic substitute,
                                                                                          open approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRB049..................  Replacement of left hip
                            device from left hip                                          joint with ceramic on
                            joint, open approach.                                         polyethylene synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRB04A..................  Replacement of left hip
                            device from left hip                                          joint with ceramic on
                            joint, open approach.                                         polyethylene synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRB04Z..................  Replacement of left hip
                            device from left hip                                          joint with ceramic on
                            joint, open approach.                                         polyethylene synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRB0J9..................  Replacement of left hip
                            device from left hip                                          joint with synthetic
                            joint, open approach.                                         substitute, cemented,
                                                                                          open approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRB0JA..................  Replacement of left hip
                            device from left hip                                          joint with synthetic
                            joint, open approach.                                         substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRB0JZ..................  Replacement of left hip
                            device from left hip                                          joint with synthetic
                            joint, open approach.                                         substitute, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRE009..................  Replacement of left hip
                            device from left hip                                          joint, acetabular
                            joint, open approach.                                         surface with
                                                                                          polyethylene synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRE00A..................  Replacement of left hip
                            device from left hip                                          joint, acetabular
                            joint, open approach.                                         surface with
                                                                                          polyethylene synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.

[[Page 24390]]

 
0SPB0BZ..................  Removal of resurfacing       and   0SRE00Z..................  Replacement of left hip
                            device from left hip                                          joint, acetabular
                            joint, open approach.                                         surface with
                                                                                          polyethylene synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRE019..................  Replacement of left hip
                            device from left hip                                          joint, acetabular
                            joint, open approach.                                         surface with metal
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRE01A..................  Replacement of left hip
                            device from left hip                                          joint, acetabular
                            joint, open approach.                                         surface with metal
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRE01Z..................  Replacement of left hip
                            device from left hip                                          joint, acetabular
                            joint, open approach.                                         surface with metal
                                                                                          synthetic substitute,
                                                                                          open approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRE039..................  Replacement of left hip
                            device from left hip                                          joint, acetabular
                            joint, open approach.                                         surface with ceramic
                                                                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRE03A..................  Replacement of left hip
                            device from left hip                                          joint, acetabular
                            joint, open approach.                                         surface with ceramic
                                                                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRE03Z..................  Replacement of left hip
                            device from left hip                                          joint, acetabular
                            joint, open approach.                                         surface with ceramic
                                                                                          synthetic substitute,
                                                                                          open approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRE0J9..................  Replacement of left hip
                            device from left hip                                          joint, acetabular
                            joint, open approach.                                         surface with synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRE0JA..................  Replacement of left hip
                            device from left hip                                          joint, acetabular
                            joint, open approach.                                         surface with synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRE0JZ..................  Replacement of left hip
                            device from left hip                                          joint, acetabular
                            joint, open approach.                                         surface with synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRS019..................  Replacement of left hip
                            device from left hip                                          joint, femoral surface
                            joint, open approach.                                         with metal synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRS01A..................  Replacement of left hip
                            device from left hip                                          joint, femoral surface
                            joint, open approach.                                         with metal synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRS01Z..................  Replacement of left hip
                            device from left hip                                          joint, femoral surface
                            joint, open approach.                                         with metal synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRS039..................  Replacement of left hip
                            device from left hip                                          joint, femoral surface
                            joint, open approach.                                         with ceramic synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRS03A..................  Replacement of left hip
                            device from left hip                                          joint, femoral surface
                            joint, open approach.                                         with ceramic synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRS03Z..................  Replacement of left hip
                            device from left hip                                          joint, femoral surface
                            joint, open approach.                                         with ceramic synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRS0J9..................  Replacement of left hip
                            device from left hip                                          joint, femoral surface
                            joint, open approach.                                         with synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRS0JA..................  Replacement of left hip
                            device from left hip                                          joint, femoral surface
                            joint, open approach.                                         with synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SRS0JZ..................  Replacement of left hip
                            device from left hip                                          joint, femoral surface
                            joint, open approach.                                         with synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB0BZ..................  Removal of resurfacing       and   0SUB09Z..................  Supplement left hip
                            device from left hip                                          joint with liner, open
                            joint, open approach.                                         approach.
0SPB0BZ..................  Removal of resurfacing       and   0SUE09Z..................  Supplement left hip
                            device from left hip                                          joint, acetabular
                            joint, open approach.                                         surface with liner,
                                                                                          open approach.
0SPB0BZ..................  Removal of resurfacing       and   0SUS09Z..................  Supplement left hip
                            device from left hip                                          joint, femoral surface
                            joint, open approach.                                         with liner, open
                                                                                          approach.
0SPB0JZ..................  Removal of synthetic         and   0SRB049..................  Replacement of left hip
                            substitute from left                                          joint with ceramic on
                            hip joint, open                                               polyethylene synthetic
                            approach.                                                     substitute, cemented,
                                                                                          open approach.
0SPB0JZ..................  Removal of synthetic         and   0SRB04A..................  Replacement of left hip
                            substitute from left                                          joint with ceramic on
                            hip joint, open                                               polyethylene synthetic
                            approach.                                                     substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB0JZ..................  Removal of synthetic         and   0SRB04Z..................  Replacement of left hip
                            substitute from left                                          joint with ceramic on
                            hip joint, open                                               polyethylene synthetic
                            approach.                                                     substitute, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRB019..................  Replacement of left hip
                            left hip joint,                                               joint with metal
                            percutaneous endoscopic                                       synthetic substitute,
                            approach.                                                     cemented, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRB01A..................  Replacement of left hip
                            left hip joint,                                               joint with metal
                            percutaneous endoscopic                                       synthetic substitute,
                            approach.                                                     uncemented, open
                                                                                          approach.

[[Page 24391]]

 
0SPB48Z..................  Removal of spacer from       and   0SRB01Z..................  Replacement of left hip
                            left hip joint,                                               joint with metal
                            percutaneous endoscopic                                       synthetic substitute,
                            approach.                                                     open approach.
0SPB48Z..................  Removal of spacer from       and   0SRB029..................  Replacement of left hip
                            left hip joint,                                               joint with metal on
                            percutaneous endoscopic                                       polyethylene synthetic
                            approach.                                                     substitute, cemented,
                                                                                          open approach.
0SPB48Z..................  Removal of spacer from       and   0SRB02A..................  Replacement of left hip
                            left hip joint,                                               joint with metal on
                            percutaneous endoscopic                                       polyethylene synthetic
                            approach.                                                     substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRB02Z..................  Replacement of left hip
                            left hip joint,                                               joint with metal on
                            percutaneous endoscopic                                       polyethylene synthetic
                            approach.                                                     substitute, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRB039..................  Replacement of left hip
                            left hip joint,                                               joint with ceramic
                            percutaneous endoscopic                                       synthetic substitute,
                            approach.                                                     cemented, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRB03A..................  Replacement of left hip
                            left hip joint,                                               joint with ceramic
                            percutaneous endoscopic                                       synthetic substitute,
                            approach.                                                     uncemented, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRB03Z..................  Replacement of left hip
                            left hip joint,                                               joint with ceramic
                            percutaneous endoscopic                                       synthetic substitute,
                            approach.                                                     open approach.
0SPB48Z..................  Removal of spacer from       and   0SRB049..................  Replacement of left hip
                            left hip joint,                                               joint with ceramic on
                            percutaneous endoscopic                                       polyethylene synthetic
                            approach.                                                     substitute, cemented,
                                                                                          open approach.
0SPB48Z..................  Removal of spacer from       and   0SRB04A..................  Replacement of left hip
                            left hip joint,                                               joint with ceramic on
                            percutaneous endoscopic                                       polyethylene synthetic
                            approach.                                                     substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRB04Z..................  Replacement of left hip
                            left hip joint,                                               joint with ceramic on
                            percutaneous endoscopic                                       polyethylene synthetic
                            approach.                                                     substitute, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRB0J9..................  Replacement of left hip
                            left hip joint,                                               joint with synthetic
                            percutaneous endoscopic                                       substitute, cemented,
                            approach.                                                     open approach.
0SPB48Z..................  Removal of spacer from       and   0SRB0JA..................  Replacement of left hip
                            left hip joint,                                               joint with synthetic
                            percutaneous endoscopic                                       substitute,
                            approach.                                                     uncemented, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRB0JZ..................  Replacement of left hip
                            left hip joint,                                               joint with synthetic
                            percutaneous endoscopic                                       substitute, open
                            approach.                                                     approach.
0SPB48Z..................  Removal of spacer from       and   0SRE009..................  Replacement of left hip
                            left hip joint,                                               joint, acetabular
                            percutaneous endoscopic                                       surface with
                            approach.                                                     polyethylene synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB48Z..................  Removal of spacer from       and   0SRE00A..................  Replacement of left hip
                            left hip joint,                                               joint, acetabular
                            percutaneous endoscopic                                       surface with
                            approach.                                                     polyethylene synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRE00Z..................  Replacement of left hip
                            left hip joint,                                               joint, acetabular
                            percutaneous endoscopic                                       surface with
                            approach.                                                     polyethylene synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRE019..................  Replacement of left hip
                            left hip joint,                                               joint, acetabular
                            percutaneous endoscopic                                       surface with metal
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRE01A..................  Replacement of left hip
                            left hip joint,                                               joint, acetabular
                            percutaneous endoscopic                                       surface with metal
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRE01Z..................  Replacement of left hip
                            left hip joint,                                               joint, acetabular
                            percutaneous endoscopic                                       surface with metal
                            approach.                                                     synthetic substitute,
                                                                                          open approach.
0SPB48Z..................  Removal of spacer from       and   0SRE039..................  Replacement of left hip
                            left hip joint,                                               joint, acetabular
                            percutaneous endoscopic                                       surface with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRE03A..................  Replacement of left hip
                            left hip joint,                                               joint, acetabular
                            percutaneous endoscopic                                       surface with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRE03Z..................  Replacement of left hip
                            left hip joint,                                               joint, acetabular
                            percutaneous endoscopic                                       surface with ceramic
                            approach.                                                     synthetic substitute,
                                                                                          open approach.
0SPB48Z..................  Removal of spacer from       and   0SRE0J9..................  Replacement of left hip
                            left hip joint,                                               joint, acetabular
                            percutaneous endoscopic                                       surface with synthetic
                            approach.                                                     substitute, cemented,
                                                                                          open approach.
0SPB48Z..................  Removal of spacer from       and   0SRE0JA..................  Replacement of left hip
                            left hip joint,                                               joint, acetabular
                            percutaneous endoscopic                                       surface with synthetic
                            approach.                                                     substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRE0JZ..................  Replacement of left hip
                            left hip joint,                                               joint, acetabular
                            percutaneous endoscopic                                       surface with synthetic
                            approach.                                                     substitute, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRS019..................  Replacement of left hip
                            left hip joint,                                               joint, femoral surface
                            percutaneous endoscopic                                       with metal synthetic
                            approach.                                                     substitute, cemented,
                                                                                          open approach.

[[Page 24392]]

 
0SPB48Z..................  Removal of spacer from       and   0SRS01A..................  Replacement of left hip
                            left hip joint,                                               joint, femoral surface
                            percutaneous endoscopic                                       with metal synthetic
                            approach.                                                     substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRS01Z..................  Replacement of left hip
                            left hip joint,                                               joint, femoral surface
                            percutaneous endoscopic                                       with metal synthetic
                            approach.                                                     substitute, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRS039..................  Replacement of left hip
                            left hip joint,                                               joint, femoral surface
                            percutaneous endoscopic                                       with ceramic synthetic
                            approach.                                                     substitute, cemented,
                                                                                          open approach.
0SPB48Z..................  Removal of spacer from       and   0SRS03A..................  Replacement of left hip
                            left hip joint,                                               joint, femoral surface
                            percutaneous endoscopic                                       with ceramic synthetic
                            approach.                                                     substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRS03Z..................  Replacement of left hip
                            left hip joint,                                               joint, femoral surface
                            percutaneous endoscopic                                       with ceramic synthetic
                            approach.                                                     substitute, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRS0J9..................  Replacement of left hip
                            left hip joint,                                               joint, femoral surface
                            percutaneous endoscopic                                       with synthetic
                            approach.                                                     substitute, cemented,
                                                                                          open approach.
0SPB48Z..................  Removal of spacer from       and   0SRS0JA..................  Replacement of left hip
                            left hip joint,                                               joint, femoral surface
                            percutaneous endoscopic                                       with synthetic
                            approach.                                                     substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SRS0JZ..................  Replacement of left hip
                            left hip joint,                                               joint, femoral surface
                            percutaneous endoscopic                                       with synthetic
                            approach.                                                     substitute, open
                                                                                          approach.
0SPB48Z..................  Removal of spacer from       and   0SUB09Z..................  Supplement left hip
                            left hip joint,                                               joint with liner, open
                            percutaneous endoscopic                                       approach.
                            approach.
0SPB48Z..................  Removal of spacer from       and   0SUE09Z..................  Supplement left hip
                            left hip joint,                                               joint, acetabular
                            percutaneous endoscopic                                       surface with liner,
                            approach.                                                     open approach.
0SPB48Z..................  Removal of spacer from       and   0SUS09Z..................  Supplement left hip
                            left hip joint,                                               joint, femoral surface
                            percutaneous endoscopic                                       with liner, open
                            approach.                                                     approach.
0SPB4JZ..................  Removal of synthetic         and   0SRB019..................  Replacement of left hip
                            substitute from left                                          joint with metal
                            hip joint, percutaneous                                       synthetic substitute,
                            endoscopic approach.                                          cemented, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRB01A..................  Replacement of left hip
                            substitute from left                                          joint with metal
                            hip joint, percutaneous                                       synthetic substitute,
                            endoscopic approach.                                          uncemented, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRB01Z..................  Replacement of left hip
                            substitute from left                                          joint with metal
                            hip joint, percutaneous                                       synthetic substitute,
                            endoscopic approach.                                          open approach.
0SPB4JZ..................  Removal of synthetic         and   0SRB029..................  Replacement of left hip
                            substitute from left                                          joint with metal on
                            hip joint, percutaneous                                       polyethylene synthetic
                            endoscopic approach.                                          substitute, cemented,
                                                                                          open approach.
0SPB4JZ..................  Removal of synthetic         and   0SRB02A..................  Replacement of left hip
                            substitute from left                                          joint with metal on
                            hip joint, percutaneous                                       polyethylene synthetic
                            endoscopic approach.                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRB02Z..................  Replacement of left hip
                            substitute from left                                          joint with metal on
                            hip joint, percutaneous                                       polyethylene synthetic
                            endoscopic approach.                                          substitute, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRB039..................  Replacement of left hip
                            substitute from left                                          joint with ceramic
                            hip joint, percutaneous                                       synthetic substitute,
                            endoscopic approach.                                          cemented, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRB03A..................  Replacement of left hip
                            substitute from left                                          joint with ceramic
                            hip joint, percutaneous                                       synthetic substitute,
                            endoscopic approach.                                          uncemented, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRB03Z..................  Replacement of left hip
                            substitute from left                                          joint with ceramic
                            hip joint, percutaneous                                       synthetic substitute,
                            endoscopic approach.                                          open approach.
0SPB4JZ..................  Removal of synthetic         and   0SRB049..................  Replacement of left hip
                            substitute from left                                          joint with ceramic on
                            hip joint, percutaneous                                       polyethylene synthetic
                            endoscopic approach.                                          substitute, cemented,
                                                                                          open approach.
0SPB4JZ..................  Removal of synthetic         and   0SRB04A..................  Replacement of left hip
                            substitute from left                                          joint with ceramic on
                            hip joint, percutaneous                                       polyethylene synthetic
                            endoscopic approach.                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRB04Z..................  Replacement of left hip
                            substitute from left                                          joint with ceramic on
                            hip joint, percutaneous                                       polyethylene synthetic
                            endoscopic approach.                                          substitute, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRB0J9..................  Replacement of left hip
                            substitute from left                                          joint with synthetic
                            hip joint, percutaneous                                       substitute, cemented,
                            endoscopic approach.                                          open approach.
0SPB4JZ..................  Removal of synthetic         and   0SRB0JA..................  Replacement of left hip
                            substitute from left                                          joint with synthetic
                            hip joint, percutaneous                                       substitute,
                            endoscopic approach.                                          uncemented, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRB0JZ..................  Replacement of left hip
                            substitute from left                                          joint with synthetic
                            hip joint, percutaneous                                       substitute, open
                            endoscopic approach.                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRE009..................  Replacement of left hip
                            substitute from left                                          joint, acetabular
                            hip joint, percutaneous                                       surface with
                            endoscopic approach.                                          polyethylene synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPB4JZ..................  Removal of synthetic         and   0SRE00A..................  Replacement of left hip
                            substitute from left                                          joint, acetabular
                            hip joint, percutaneous                                       surface with
                            endoscopic approach.                                          polyethylene synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRE00Z..................  Replacement of left hip
                            substitute from left                                          joint, acetabular
                            hip joint, percutaneous                                       surface with
                            endoscopic approach.                                          polyethylene synthetic
                                                                                          substitute, open
                                                                                          approach.

[[Page 24393]]

 
0SPB4JZ..................  Removal of synthetic         and   0SRE019..................  Replacement of left hip
                            substitute from left                                          joint, acetabular
                            hip joint, percutaneous                                       surface with metal
                            endoscopic approach.                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRE01A..................  Replacement of left hip
                            substitute from left                                          joint, acetabular
                            hip joint, percutaneous                                       surface with metal
                            endoscopic approach.                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRE01Z..................  Replacement of left hip
                            substitute from left                                          joint, acetabular
                            hip joint, percutaneous                                       surface with metal
                            endoscopic approach.                                          synthetic substitute,
                                                                                          open approach.
0SPB4JZ..................  Removal of synthetic         and   0SRE039..................  Replacement of left hip
                            substitute from left                                          joint, acetabular
                            hip joint, percutaneous                                       surface with ceramic
                            endoscopic approach.                                          synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRE03A..................  Replacement of left hip
                            substitute from left                                          joint, acetabular
                            hip joint, percutaneous                                       surface with ceramic
                            endoscopic approach.                                          synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRE03Z..................  Replacement of left hip
                            substitute from left                                          joint, acetabular
                            hip joint, percutaneous                                       surface with ceramic
                            endoscopic approach.                                          synthetic substitute,
                                                                                          open approach.
0SPB4JZ..................  Removal of synthetic         and   0SRE0J9..................  Replacement of left hip
                            substitute from left                                          joint, acetabular
                            hip joint, percutaneous                                       surface with synthetic
                            endoscopic approach.                                          substitute, cemented,
                                                                                          open approach.
0SPB4JZ..................  Removal of synthetic         and   0SRE0JA..................  Replacement of left hip
                            substitute from left                                          joint, acetabular
                            hip joint, percutaneous                                       surface with synthetic
                            endoscopic approach.                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRE0JZ..................  Replacement of left hip
                            substitute from left                                          joint, acetabular
                            hip joint, percutaneous                                       surface with synthetic
                            endoscopic approach.                                          substitute, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRS019..................  Replacement of left hip
                            substitute from left                                          joint, femoral surface
                            hip joint, percutaneous                                       with metal synthetic
                            endoscopic approach.                                          substitute, cemented,
                                                                                          open approach.
0SPB4JZ..................  Removal of synthetic         and   0SRS01A..................  Replacement of left hip
                            substitute from left                                          joint, femoral surface
                            hip joint, percutaneous                                       with metal synthetic
                            endoscopic approach.                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRS01Z..................  Replacement of left hip
                            substitute from left                                          joint, femoral surface
                            hip joint, percutaneous                                       with metal synthetic
                            endoscopic approach.                                          substitute, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRS039..................  Replacement of left hip
                            substitute from left                                          joint, femoral surface
                            hip joint, percutaneous                                       with ceramic synthetic
                            endoscopic approach.                                          substitute, cemented,
                                                                                          open approach.
0SPB4JZ..................  Removal of synthetic         and   0SRS03A..................  Replacement of left hip
                            substitute from left                                          joint, femoral surface
                            hip joint, percutaneous                                       with ceramic synthetic
                            endoscopic approach.                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRS03Z..................  Replacement of left hip
                            substitute from left                                          joint, femoral surface
                            hip joint, percutaneous                                       with ceramic synthetic
                            endoscopic approach.                                          substitute, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRS0J9..................  Replacement of left hip
                            substitute from left                                          joint, femoral surface
                            hip joint, percutaneous                                       with synthetic
                            endoscopic approach.                                          substitute, cemented,
                                                                                          open approach.
0SPB4JZ..................  Removal of synthetic         and   0SRS0JA..................  Replacement of left hip
                            substitute from left                                          joint, femoral surface
                            hip joint, percutaneous                                       with synthetic
                            endoscopic approach.                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SRS0JZ..................  Replacement of left hip
                            substitute from left                                          joint, femoral surface
                            hip joint, percutaneous                                       with synthetic
                            endoscopic approach.                                          substitute, open
                                                                                          approach.
0SPB4JZ..................  Removal of synthetic         and   0SUB09Z..................  Supplement left hip
                            substitute from left                                          joint with liner, open
                            hip joint, percutaneous                                       approach.
                            endoscopic approach.
0SPB4JZ..................  Removal of synthetic         and   0SUE09Z..................  Supplement left hip
                            substitute from left                                          joint, acetabular
                            hip joint, percutaneous                                       surface with liner,
                            endoscopic approach.                                          open approach.
0SPB4JZ..................  Removal of synthetic         and   0SUS09Z..................  Supplement left hip
                            substitute from left                                          joint, femoral surface
                            hip joint, percutaneous                                       with liner, open
                            endoscopic approach.                                          approach
----------------------------------------------------------------------------------------------------------------


  MS-DRG 466-468 ICD-10-PCS Code Pairs To Be Added to the Version 33 ICD-10 MS-DRGs 466, 467, and 468: Proposed
                                    New Knee Revision ICD-10-PCS Combinations
----------------------------------------------------------------------------------------------------------------
     ICD-10-PCS code           Code descriptions                   ICD-10-PCS code           Code description
----------------------------------------------------------------------------------------------------------------
0SPC09Z                    Removal of liner from        and   0SRC0J9..................  Replacement of right
                            right knee joint, open                                        knee joint with
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SPC09Z                    Removal of liner from        and   0SRC0JA..................  Replacement of right
                            right knee joint, open                                        knee joint with
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPC09Z                    Removal of liner from        and   0SRC0JZ..................  Replacement of right
                            right knee joint, open                                        knee joint with
                            approach.                                                     synthetic substitute,
                                                                                          open approach.

[[Page 24394]]

 
0SPC09Z                    Removal of liner from        and   0SRT0J9..................  Replacement of right
                            right knee joint, open                                        knee joint, femoral
                            approach.                                                     surface with synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPC09Z                    Removal of liner from        and   0SRT0JA..................  Replacement of right
                            right knee joint, open                                        knee joint, femoral
                            approach.                                                     surface with synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPC09Z                    Removal of liner from        and   0SRT0JZ..................  Replacement of right
                            right knee joint, open                                        knee joint, femoral
                            approach.                                                     surface with synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPC09Z                    Removal of liner from        and   0SRV0J9..................  Replacement of right
                            right knee joint, open                                        knee joint, tibial
                            approach.                                                     surface with synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPC09Z                    Removal of liner from        and   0SRV0JA..................  Replacement of right
                            right knee joint, open                                        knee joint, tibial
                            approach.                                                     surface with synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPC09Z                    Removal of liner from        and   0SRV0JZ..................  Replacement of right
                            right knee joint, open                                        knee joint, tibial
                            approach.                                                     surface with synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPC0JZ                    Removal of synthetic         and   0SRT0J9..................  Replacement of right
                            substitute from right                                         knee joint, femoral
                            knee joint, open                                              surface with synthetic
                            approach.                                                     substitute, cemented,
                                                                                          open approach.
0SPC0JZ                    Removal of synthetic         and   0SRT0JA..................  Replacement of right
                            substitute from right                                         knee joint, femoral
                            knee joint, open                                              surface with synthetic
                            approach.                                                     substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPC0JZ                    Removal of synthetic         and   0SRV0J9..................  Replacement of right
                            substitute from right                                         knee joint, tibial
                            knee joint, open                                              surface with synthetic
                            approach.                                                     substitute, cemented,
                                                                                          open approach.
0SPC0JZ                    Removal of synthetic         and   0SRV0JA..................  Replacement of right
                            substitute from right                                         knee joint, tibial
                            knee joint, open                                              surface with synthetic
                            approach.                                                     substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPC4JZ                    Removal of synthetic         and   0SRT0J9..................  Replacement of right
                            substitute from right                                         knee joint, femoral
                            knee joint,                                                   surface with synthetic
                            percutaneous endoscopic                                       substitute, cemented,
                            approach.                                                     open approach.
0SPC4JZ                    Removal of synthetic         and   0SRT0JA..................  Replacement of right
                            substitute from right                                         knee joint, femoral
                            knee joint,                                                   surface with synthetic
                            percutaneous endoscopic                                       substitute,
                            approach.                                                     uncemented, open
                                                                                          approach.
0SPC4JZ                    Removal of synthetic         and   0SRV0J9..................  Replacement of right
                            substitute from right                                         knee joint, tibial
                            knee joint,                                                   surface with synthetic
                            percutaneous endoscopic                                       substitute, cemented,
                            approach.                                                     open approach.
0SPC4JZ                    Removal of synthetic         and   0SRV0JA..................  Replacement of right
                            substitute from right                                         knee joint, tibial
                            knee joint,                                                   surface with synthetic
                            percutaneous endoscopic                                       substitute,
                            approach.                                                     uncemented, open
                                                                                          approach.
0SPD09Z                    Removal of liner from        and   0SRD0J9..................  Replacement of left
                            left knee joint, open                                         knee joint with
                            approach.                                                     synthetic substitute,
                                                                                          cemented, open
                                                                                          approach.
0SPD09Z                    Removal of liner from        and   0SRD0JA..................  Replacement of left
                            left knee joint, open                                         knee joint with
                            approach.                                                     synthetic substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPD09Z                    Removal of liner from        and   0SRD0JZ..................  Replacement of left
                            left knee joint, open                                         knee joint with
                            approach.                                                     synthetic substitute,
                                                                                          open approach.
0SPD09Z                    Removal of liner from        and   0SRU0J9..................  Replacement of left
                            left knee joint, open                                         knee joint, femoral
                            approach.                                                     surface with synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPD09Z                    Removal of liner from        and   0SRU0JA..................  Replacement of left
                            left knee joint, open                                         knee joint, femoral
                            approach.                                                     surface with synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPD09Z                    Removal of liner from        and   0SRU0JZ..................  Replacement of left
                            left knee joint, open                                         knee joint, femoral
                            approach.                                                     surface with synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPD09Z                    Removal of liner from        and   0SRW0J9..................  Replacement of left
                            left knee joint, open                                         knee joint, tibial
                            approach.                                                     surface with synthetic
                                                                                          substitute, cemented,
                                                                                          open approach.
0SPD09Z                    Removal of liner from        and   0SRW0JA..................  Replacement of left
                            left knee joint, open                                         knee joint, tibial
                            approach.                                                     surface with synthetic
                                                                                          substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPD09Z                    Removal of liner from        and   0SRW0JZ..................  Replacement of left
                            left knee joint, open                                         knee joint, tibial
                            approach.                                                     surface with synthetic
                                                                                          substitute, open
                                                                                          approach.
0SPD0JZ                    Removal of synthetic         and   0SRU0J9..................  Replacement of left
                            substitute from left                                          knee joint, femoral
                            knee joint, open                                              surface with synthetic
                            approach.                                                     substitute, cemented,
                                                                                          open approach.
0SPD0JZ                    Removal of synthetic         and   0SRU0JA..................  Replacement of left
                            substitute from left                                          knee joint, femoral
                            knee joint, open                                              surface with synthetic
                            approach.                                                     substitute,
                                                                                          uncemented, open
                                                                                          approach.
0SPD0JZ                    Removal of synthetic         and   0SRW0J9..................  Replacement of left
                            substitute from left                                          knee joint, tibial
                            knee joint, open                                              surface with synthetic
                            approach.                                                     substitute, cemented,
                                                                                          open approach.
0SPD0JZ                    Removal of synthetic         and   0SRW0JA..................  Replacement of left
                            substitute from left                                          knee joint, tibial
                            knee joint, open                                              surface with synthetic
                            approach.                                                     substitute,
                                                                                          uncemented, open
                                                                                          approach.

[[Page 24395]]

 
0SPD0JZ                    Removal of synthetic         and   0SRW0JZ..................  Replacement of left
                            substitute from left                                          knee joint, tibial
                            knee joint, open                                              surface with synthetic
                            approach.                                                     substitute, open
                                                                                          approach.
0SPD4JZ                    Removal of synthetic         and   0SRU0J9..................  Replacement of left
                            substitute from left                                          knee joint, femoral
                            knee joint,                                                   surface with synthetic
                            percutaneous endoscopic                                       substitute, cemented,
                            approach.                                                     open approach.
0SPD4JZ                    Removal of synthetic         and   0SRU0JA..................  Replacement of left
                            substitute from left                                          knee joint, femoral
                            knee joint,                                                   surface with synthetic
                            percutaneous endoscopic                                       substitute,
                            approach.                                                     uncemented, open
                                                                                          approach.
0SPD4JZ                    Removal of synthetic         and   0SRW0J9..................  Replacement of left
                            substitute from left                                          knee joint, tibial
                            knee joint,                                                   surface with synthetic
                            percutaneous endoscopic                                       substitute, cemented,
                            approach.                                                     open approach.
0SPD4JZ                    Removal of synthetic         and   0SRW0JA..................  Replacement of left
                            substitute from left                                          knee joint, tibial
                            knee joint,                                                   surface with synthetic
                            percutaneous endoscopic                                       substitute,
                            approach.                                                     uncemented, open
                                                                                          approach.
0SPD4JZ                    Removal of synthetic         and   0SRW0JZ..................  Replacement of left
                            substitute from left                                          knee joint, tibial
                            knee joint,                                                   surface with synthetic
                            percutaneous endoscopic                                       substitute, open
                            approach.                                                     approach.
----------------------------------------------------------------------------------------------------------------

    We are inviting public comments on our proposal to add the joint 
revision code combinations listed above to MS-DRGs 466, 467, and 468.
b. Spinal Fusion
    We received a request to revise the titles of MS-DRGs 456, 457, and 
458 (Spinal Fusion Except Cervical with Spinal Curvature/Malignancy/
Infection or 9+ Fusion with MCC, with CC, and without CC/MCC, 
respectively) for the ICD-10 MS-DRGs so that they more closely 
correspond to the terminology used to describe the ICD-10-PCS procedure 
codes without changing the ICD-10 MS-DRG logic. We agree with the 
requestor that revising the titles of these MS-DRGs would more 
appropriately identify the procedures classified under these groupings. 
Therefore, we are proposing new titles for these three MS-DRGs that 
would change the reference of ``9+ Fusions'' to ``Extensive Fusions.'' 
The proposed title revisions to MS-DRGs 456, 457, and 458 for the FY 
2016 ICD-10 MS-DRGs Version 33 are as follows:
     MS-DRG 456 (Spinal Fusion Except Cervical with Spinal 
Curvature/Malignancy/Infection or Extensive Fusion with MCC)
     MS-DRG 457 (Spinal Fusion Except Cervical with Spinal 
Curvature/Malignancy/Infection or Extensive Fusion with CC)
     MS-DRG 458 (Spinal Fusion Except Cervical with Spinal 
Curvature/Malignancy/Infection or Extensive Fusion without CC/MCC).
    We are inviting public comments on our proposal.
5. MDC 14 (Pregnancy, Childbirth and the Puerperium): MS-DRG 775 
(Vaginal Delivery Without Complicating Diagnosis)
    We received a request to modify the logic for ICD-10 MS-DRG 775 
(Vaginal Delivery without Complicating Diagnosis) so that the procedure 
code for the induction of labor with a cervical ripening gel would not 
group to the incorrect MS-DRG when a normal delivery has occurred. ICD-
10-PCS code 3E0P7GC (Introduction of other therapeutic substance into 
female reproductive, via natural or artificial opening) describes this 
procedure.
    We reviewed how this code is currently classified under the ICD-10 
MS-DRGs Version 32 and noted that it is currently designated as an 
operating room (O.R.) code affecting MS-DRG assignment. We agree with 
the requestor that the current logic for ICD-10-PCS procedure code 
3E0P7GC does not result in the appropriate MS-DRG assignment. The 
result of our analysis suggests that this code should not be designated 
as an O.R. code. Our clinical advisors agree that this procedure does 
not require the intensity or complexity of service and resource 
utilization to merit an O.R. designation under ICD-10. Therefore, we 
are proposing to make ICD-10-PCS procedure code 3E0P7GC a non-O.R. code 
so that cases reporting this procedure code will group to the 
appropriate MS-DRG assignment. We are inviting public comments on our 
proposal.
    Our analysis of ICD-10-PCS code 3E0P7GC also prompted the review of 
additional, similar codes that describe the introduction of a 
substance. We evaluated the following ICD-10-PCS procedure codes:
     3E0P76Z (Introduction of nutritional substance into female 
reproductive, via natural or artificial opening);
     3E0P77Z (Introduction of electrolytic and water balance 
substance into female reproductive, via natural or artificial opening);
     3E0P7SF (Introduction of other gas into female 
reproductive, via natural or artificial opening);
     3E0P83Z (Introduction of anti-inflammatory into female 
reproductive, via natural or artificial opening endoscopic);
     3E0P86Z (Introduction of nutritional substance into female 
reproductive, via natural or artificial opening endoscopic);
     3E0P87Z (Introduction of electrolytic and water balance 
substance into female reproductive, via natural or artificial opening 
endoscopic);
     3E0P8GC (Introduction of other therapeutic substance into 
female reproductive, via natural or artificial opening endoscopic); and
     3E0P8SF (Introduction of other gas into female 
reproductive, via natural or artificial opening endoscopic).
    From our analysis, we determined that these codes also are 
currently designated as O.R. codes affecting MS-DRG assignment. Our 
clinical advisors recommended that these codes should also be 
designated as non-O.R. because they do not require the intensity or 
complexity of service and resource utilization to merit an O.R. 
designation under the ICD-10 MS-DRGs. As a result of our analysis and 
our clinical advisors' recommendation, we are proposing to designate 
the above listed ICD-10-PCS procedure codes as non-O.R. codes to ensure 
that these codes will group to the appropriate MS-DRG assignment.
    We are inviting public comments on our proposal.

[[Page 24396]]

6. MDC 21 (Injuries, Poisonings and Toxic Effects of Drugs): CroFab 
Antivenin Drug
    We received a request that CMS change the MS-DRG assignment for 
antivenom cases from MS-DRG 917 and 918 (Poisoning & Toxic Effects of 
Drugs with and without MCC, respectively). For these MS-DRGs, we 
examined claims data from the December 2014 update of the FY 2014 
MedPAR file for ICD-9-CM diagnosis codes of a principal diagnosis 989.5 
(Toxic effect of venom), a secondary diagnosis ICD-9-CM E code of 
E905.0 (Venomous snakes and lizards), and the ICD-9-CM procedure code 
of 99.16 (Injection of antidote), which is a non-O.R. code and does not 
impact the MS-DRG assignment.
    For the ICD-9-CM diagnosis code 989.5 (Toxic effect of venom), the 
ICD-10-CM provides more detailed diagnosis codes for these toxic 
effects of venom cases as shown in the following table:

                          ICD-10-CM Code Translations for ICD-9-CM Diagnosis Code 989.5
----------------------------------------------------------------------------------------------------------------
               ICD-10-CM code                                          Code description
----------------------------------------------------------------------------------------------------------------
T63.001A....................................  Toxic effect of unspecified snake venom, accidental
                                               (unintentional), initial encounter.
T63.011A....................................  Toxic effect of rattlesnake venom, accidental (unintentional)
                                               initial encounter.
T63.021A....................................  Toxic effect of coral snake venom, accidental (unintentional),
                                               initial encounter.
T63.031A....................................  Toxic effect of taipan venom, accidental (unintentional), initial
                                               encounter.
T63.041A....................................  Toxic effect of cobra venom, accidental (unintentional), initial
                                               encounter.
T63.061A....................................  Toxic effect of venom of other North and South American snake,
                                               accidental (unintentional), initial encounter.
T63.71A.....................................  Toxic effect of venom of other Australian snake, accidental
                                               (unintentional), initial encounter.
T63.081A....................................  Toxic effect of venom of other African and Asian snake, accidental
                                               (unintentional), initial encounter.
T63.091A....................................  Toxic effect of venom of other snake, accidental (unintentional),
                                               initial encounter.
----------------------------------------------------------------------------------------------------------------

    For the ICD-9-CM Supplementary Classification of External Causes of 
Injury and Poisoning code E905.0 (Venomous snakes and lizards), ICD-10-
CM provides more detailed diagnosis codes for these cases as shown in 
the following table:

                              ICD-10-CM Code Translations for ICD-9-CM Code E905.0
----------------------------------------------------------------------------------------------------------------
               ICD-10-CM code                                          Code description
----------------------------------------------------------------------------------------------------------------
T63.001A....................................  Toxic effect of unspecified snake venom, accidental
                                               (unintentional), initial encounter.
T63.011A....................................  Toxic effect of rattlesnake venom, accidental (unintentional)
                                               initial encounter.
T63.021A....................................  Toxic effect of coral snake venom, accidental (unintentional),
                                               initial encounter.
T63.031A....................................  Toxic effect of taipan venom, accidental (unintentional), initial
                                               encounter.
T63.041A....................................  Toxic effect of cobra venom, accidental (unintentional), initial
                                               encounter.
T63.061A....................................  Toxic effect of venom of other North and South American snake,
                                               accidental (unintentional), initial encounter.
T63.71A.....................................  Toxic effect of venom of other Australian snake, accidental
                                               (unintentional), initial encounter.
T63.081A....................................  Toxic effect of venom of other African and Asian snake, accidental
                                               (unintentional), initial encounter.
T63.091A....................................  Toxic effect of venom of other snake, accidental (unintentional),
                                               initial encounter.
----------------------------------------------------------------------------------------------------------------

    We examined claims data for injections for snake bites reported in 
MS-DRGs 917 and 918 from the December 2014 update of the FY 2014 MedPAR 
file. Our findings are displayed in the table below.

                                           Snake Bite With Injections
----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
                             MS-DRG                                    cases      length of stay  Average  costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 917--All cases...........................................          26,393            4.77          $9,983
MS-DRG 917--Cases with principal diagnosis code 989.5 and                      0               0               0
 secondary diagnosis code E905.0 with procedure code 99.16 (non-
 OR)............................................................
MS-DRG 918--All cases...........................................          24,557            2.90           4,953
MS-DRG 918--Cases with principal diagnosis code 989.5 and                     19            2.16          12,014
 secondary diagnosis code E905.0 with procedure code 99.16 (non-
 OR)............................................................
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, we identified 19 cases of injections 
for snake bites reported in MS-DRG 918 only. This small number of cases 
(19) does not provide justification to create a new MS-DRG. The cases 
are assigned to the same MS-DRG as are other types of poisonings and 
toxic effects. We were unable to find another MS-DRG that would be a 
more appropriate MS-DRG assignment for these cases based on the 
clinical nature of this condition. The MS-DRGs are a classification 
system intended to group together diagnoses and procedures with similar 
clinical characteristics and utilization of resources. Basing a new MS-
DRG on such a small number of cases (19) could lead to distortions in 
the relative payment weights for the MS-DRG because several expensive 
cases could impact the overall relative payment weight. Having larger 
clinical cohesive groups within an MS-DRG provides greater stability 
for annual updates to the relative payment weights.
    Our clinical advisors reviewed the data, evaluated these 
conditions, and recommended that we not change the MS-DRG assignment 
for CroFab antivenom drug for snake bites because these cases are 
clinically similar to other poisoning cases currently assigned to

[[Page 24397]]

MS-DRGs 917 and 918. Based on the findings in our data analysis and the 
recommendations of our clinical advisors, we are proposing to maintain 
the current assignment of diagnosis codes in MS-DRGs 917 and 918. We 
are not proposing any MS-DRG changes for cases of CroFab antivenom 
drugs for snake bites. We are inviting public comments on our proposal.
7. MDC 22 (Burns): Additional Severity of Illness Level for MS-DRG 927 
(Extensive Burns or Full Thickness Burns With Mechanical Ventilation 
96+ Hours With Skin Graft)
    We received a request to add an additional severity level to MS-DRG 
927 (Extensive Burns or Full Thickness Burns with Mechanical 
Ventilation 96+ Hours with Skin Graft). The requestor was concerned 
about payment for severe burn cases that used dermal regenerative 
grafts. These grafts are captured by procedure code 86.67 (Dermal 
regenerative graft). The requestor stated that the total cost of these 
graft cases is significantly greater than the average total costs for 
all cases in MS-DRG 927. The requestor stated that the dermal 
regenerative grafts are used to cover large burns where donor skin is 
not available. The requestor stated that the grafts provide permanent 
covering of the wound and thus immediate closure of the wound. The 
requestor asserted that the grafts offer benefits such as the avoidance 
of infections. The requestor pointed out that MS-DRG 927 is not 
subdivided into severity of illness levels and recommended an 
additional severity level be added to address any payment issues for 
dermal regenerative grafts within MS-DRG 927.
    ICD-10-PCS provides more detailed and specific codes for skin 
grafts. The ICD-10-PCS codes for skin grafts provide specific 
information on the part of the body receiving the skin graft, the type 
of graft, and the approach used to apply the graft. These codes can be 
found in the table labeled ``OHR (Replacement of Skin)'' in the ICD-10 
MS-DRG Version 32 Definitions Manual available on the Internet at: 
http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. As stated earlier, for the ICD-9-CM codes that result in 
greater than 50 ICD-10-PCS comparable code translations, we refer 
readers to Table 6P (ICD-10-PCS Code Translations for Proposed MS-DRG 
Changes), which is available via the Internet on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. The table includes the MDC topic, the 
ICD-9-CM code, and the ICD-10-PCS code translations. In Table 6P.2a, we 
show the comparable ICD-10-PCS codes for ICD-9-CM code 86.67 (Dermal 
regenerative graft).
    We examined claims data for cases reported in MS-DRG 927 from the 
December 2014 update of the FY 2014 MedPAR file. The following table 
shows our findings.

          Extensive Burns or Full Thickness Burns With Mechanical Ventilation 96+ Hours With Skin Graft
----------------------------------------------------------------------------------------------------------------
                                                                     Number of        Average
                             MS-DRG                                    cases      length of stay  Average  costs
----------------------------------------------------------------------------------------------------------------
MS-DRG 927--All cases...........................................             171           29.92        $113,844
MS-DRG 927--Cases with procedure code 86.67.....................              22            33.5         146,903
MS-DRG 927--Cases with procedure code 86.67 and 96.72                         14            38.6         174,372
 (Mechanical ventilation for 96+ hours).........................
MS-DRG 927--Cases with procedure code 86.67 and without 96.72                  8            24.6          98,482
 (Mechanical ventilation for 96+ hours).........................
MS-DRG 927--All cases with MCC..................................             131           31.51         121,519
MS-DRG 927--All cases with CC...................................              38           25.21          91,910
MS-DRG 927--All cases without CC/MCC............................               2           15.00          27,872
----------------------------------------------------------------------------------------------------------------

    As shown in the table above, we found a total of 171 cases in MS-
DRG 927. Of these 171 cases, there were 131 cases with an MCC, 38 cases 
with a CC, and 2 cases without a CC or an MCC. The requested new 
severity level does not meet all of the criteria established in the FY 
2008 IPPS final rule (72 FR 47169), and described in section II.G.1.b. 
of the preamble of this proposed rule, that must be met to warrant the 
creation of a CC or an MCC subgroup within a base MS-DRG. Specifically, 
the requested new severity level does not meet the criterion that there 
are at least 500 cases in the CC or MCC subgroup.
    We also point out that the long-term mechanical ventilation cases 
are driving the costs to a greater extent than the graft cases. We 
found that the 22 cases that received a graft had average costs of 
$146,903. The 14 cases that had both 96+ hours of mechanical 
ventilation and a graft had average costs of $174,372. The 8 cases that 
had a graft but did not receive 96+ hours of mechanical ventilation had 
average costs of $98,482.
    Our clinical advisors reviewed this issue and recommended making no 
MS-DRG updates for MS-DRG 927. They advised us that the dermal 
regenerative graft cases are appropriately assigned to the MS-DRG 927 
because they are clinically similar to other cases within MS-DRG 927. 
Our clinical advisors also agreed that the cases in MS-DRG 927 do not 
meet the established criterion for creating a new severity level.
    Based on the findings of our data analysis, the fact that MS-DRG 
927 does not meet the criterion for the creation of an additional 
severity level, and the recommendations of our clinical advisors, we 
are not proposing to create a new severity level for MS-DRG 927. We are 
proposing to maintain the current MS-DRG 927 structure without 
additional severity levels. We are inviting public comments on our 
proposal.
8. Proposed Medicare Code Editor (MCE) Changes
    The Medicare Code Editor (MCE) is a software program that detects 
and reports errors in the coding of Medicare claims data. Patient 
diagnoses, procedure(s), and demographic information are entered into 
the Medicare claims processing systems and are subjected to a series of 
automated screens. The MCE screens are designed to identify cases that 
require further review before classification into an MS-DRG.
    As discussed in section II.G.1.a. of the preamble of this proposed 
rule, CMS prepared the ICD-10 MS-DRGs Version 32 based on the FY 2015 
MS-DRGs (Version 32) that we finalized in the FY 2015 IPPS/LTCH PPS 
final rule. In November 2014, we made available a Definitions Manual of 
the ICD-10 MS-DRGs Version 32 and the MCE Version 32 on the ICD-10 MS-
DRG Conversion Project Web site at: http://www.cms.gov/

[[Page 24398]]

Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. We also 
prepared a document that described the changes made between Version 31-
R to Version 32 to help facilitate a review of the ICD-10 MS-DRGs 
logic. We produced mainframe and computer software for ICD-10 MS-DRGs 
Version 32 and MCE Version 32, which was made available to the public 
in January 2015. Information on ordering the mainframe and computer 
software through NTIS was made available on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html under the ``Related Links'' section. We encouraged the 
public to submit to CMS any comments on areas where they believed the 
ICD-10 MS-DRG GROUPER and MCE did not accurately reflect the logic and 
edits found in the ICD-9-CM MS-DRG GROUPER and the MCE.
    For FY 2016, in order to be consistent with the ICD-9-CM MS-DRG 
GROUPER and MCE Version 32, we are proposing to add the ICD-10-PCS 
codes listed in the table below to the ICD-10 MCE Version 33 of the 
``Manifestation codes not allowed as principal diagnosis'' edit. Under 
the MCE, manifestation codes describe the ``manifestation'' of an 
underlying disease, not the disease itself. Because these codes do not 
describe the disease itself, they should not be used as principal 
diagnoses.

    ICD-10-CM Codes Proposed To Be Added to the Version 33 MCE ``Manifestation Codes Not Allowed as Principal
                                                Diagnosis'' Edit
----------------------------------------------------------------------------------------------------------------
               ICD-10-CM code                                          Code description
----------------------------------------------------------------------------------------------------------------
D75.81......................................  Myelofibrosis.
E08.00......................................  Diabetes mellitus due to underlying condition with hyperosmolarity
                                               without nonketotic hyperglycemic-hyperosmolar coma (NKHHC).
E08.01......................................  Diabetes mellitus due to underlying condition with hyperosmolarity
                                               with coma.
E08.10......................................  Diabetes mellitus due to underlying condition with ketoacidosis
                                               without coma.
E08.11......................................  Diabetes mellitus due to underlying condition with ketoacidosis
                                               with coma.
E08.21......................................  Diabetes mellitus due to underlying condition with diabetic
                                               nephropathy.
E08.22......................................  Diabetes mellitus due to underlying condition with diabetic
                                               chronic kidney disease.
E08.29......................................  Diabetes mellitus due to underlying condition with other diabetic
                                               kidney complication.
E08.311.....................................  Diabetes mellitus due to underlying condition with unspecified
                                               diabetic retinopathy with macular edema.
E08.319.....................................  Diabetes mellitus due to underlying condition with unspecified
                                               diabetic retinopathy without macular edema.
E08.321.....................................  Diabetes mellitus due to underlying condition with mild
                                               nonproliferative diabetic retinopathy with macular edema.
E08.329.....................................  Diabetes mellitus due to underlying condition with mild
                                               nonproliferative diabetic retinopathy without macular edema.
E08.331.....................................  Diabetes mellitus due to underlying condition with moderate
                                               nonproliferative diabetic retinopathy with macular edema.
E08.339.....................................  Diabetes mellitus due to underlying condition with moderate
                                               nonproliferative diabetic retinopathy without macular edema.
E08.341.....................................  Diabetes mellitus due to underlying condition with severe
                                               nonproliferative diabetic retinopathy with macular edema.
E08.349.....................................  Diabetes mellitus due to underlying condition with severe
                                               nonproliferative diabetic retinopathy without macular edema.
E08.351.....................................  Diabetes mellitus due to underlying condition with proliferative
                                               diabetic retinopathy with macular edema.
E08.359.....................................  Diabetes mellitus due to underlying condition with proliferative
                                               diabetic retinopathy without macular edema.
E08.36......................................  Diabetes mellitus due to underlying condition with diabetic
                                               cataract.
E08.39......................................  Diabetes mellitus due to underlying condition with other diabetic
                                               ophthalmic complication.
E08.40......................................  Diabetes mellitus due to underlying condition with diabetic
                                               neuropathy, unspecified.
E08.41......................................  Diabetes mellitus due to underlying condition with diabetic
                                               mononeuropathy.
E08.42......................................  Diabetes mellitus due to underlying condition with diabetic
                                               polyneuropathy.
E08.43......................................  Diabetes mellitus due to underlying condition with diabetic
                                               autonomic (poly)neuropathy.
E08.44......................................  Diabetes mellitus due to underlying condition with diabetic
                                               amyotrophy.
E08.49......................................  Diabetes mellitus due to underlying condition with other diabetic
                                               neurological complication.
E08.51......................................  Diabetes mellitus due to underlying condition with diabetic
                                               peripheral angiopathy without gangrene.
E08.52......................................  Diabetes mellitus due to underlying condition with diabetic
                                               peripheral angiopathy with gangrene.
E08.59......................................  Diabetes mellitus due to underlying condition with other
                                               circulatory complications.
E08.610.....................................  Diabetes mellitus due to underlying condition with diabetic
                                               neuropathic arthropathy.
E08.618.....................................  Diabetes mellitus due to underlying condition with other diabetic
                                               arthropathy.
E08.620.....................................  Diabetes mellitus due to underlying condition with diabetic
                                               dermatitis.
E08.621.....................................  Diabetes mellitus due to underlying condition with foot ulcer.
E08.622.....................................  Diabetes mellitus due to underlying condition with other skin
                                               ulcer.
E08.628.....................................  Diabetes mellitus due to underlying condition with other skin
                                               complications.
E08.630.....................................  Diabetes mellitus due to underlying condition with periodontal
                                               disease.
E08.638.....................................  Diabetes mellitus due to underlying condition with other oral
                                               complications.
E08.641.....................................  Diabetes mellitus due to underlying condition with hypoglycemia
                                               with coma.
E08.649.....................................  Diabetes mellitus due to underlying condition with hypoglycemia
                                               without coma.
E08.65......................................  Diabetes mellitus due to underlying condition with hyperglycemia.
E08.69......................................  Diabetes mellitus due to underlying condition with other specified
                                               complication.
E08.8.......................................  Diabetes mellitus due to underlying condition with unspecified
                                               complications.
E08.9.......................................  Diabetes mellitus due to underlying condition without
                                               complications.
----------------------------------------------------------------------------------------------------------------

    We are inviting public comment on our proposal to add the above 
list of ICD-10-CM diagnosis codes to the ``Manifestation codes not 
allowed as principal diagnosis'' edit in the FY 2016 ICD-10 MCE Version 
33.
    We also are proposing to revise the language describing the 
``Procedure inconsistent with LOS (Length of stay)'' edit which lists 
ICD-10-PCS code 5A1955Z (Respiratory ventilation, greater than 96 
consecutive hours), effective for the FY 2016 ICD-10 MCE Version 33. 
Currently, in Version 32 of the ICD-10 MCE, the language describing 
this ``Procedure inconsistent with LOS (Length of stay)'' edit states: 
``The following procedure should only

[[Page 24399]]

be coded on claims with a length of stay of four days or greater.'' 
Because the code description of the ICD-10-PCS code is for ventilation 
that occurs greater than 96 hours, we are proposing to revise the 
language for the edit to read: ``The following procedure code should 
only be coded on claims with a length of stay greater than 4 days.'' 
This proposed revision would clarify the intent of this MCE edit. We 
are inviting public comments on our proposal.
9. Proposed Changes to Surgical Hierarchies
    Some inpatient stays entail multiple surgical procedures, each one 
of which, occurring by itself, could result in assignment of the case 
to a different MS-DRG within the MDC to which the principal diagnosis 
is assigned. Therefore, it is necessary to have a decision rule within 
the GROUPER by which these cases are assigned to a single MS-DRG. The 
surgical hierarchy, an ordering of surgical classes from most resource-
intensive to least resource-intensive, performs that function. 
Application of this hierarchy ensures that cases involving multiple 
surgical procedures are assigned to the MS-DRG associated with the most 
resource-intensive surgical class.
    Because the relative resource intensity of surgical classes can 
shift as a function of MS-DRG reclassification and recalibrations, for 
FY 2016, we reviewed the surgical hierarchy of each MDC, as we have for 
previous reclassifications and recalibrations, to determine if the 
ordering of classes coincides with the intensity of resource 
utilization.
    A surgical class can be composed of one or more MS-DRGs. For 
example, in MDC 11, the surgical class ``kidney transplant'' consists 
of a single MS-DRG (MS-DRG 652) and the class ``major bladder 
procedures'' consists of three MS-DRGs (MS-DRGs 653, 654, and 655). 
Consequently, in many cases, the surgical hierarchy has an impact on 
more than one MS-DRG. The methodology for determining the most 
resource-intensive surgical class involves weighting the average 
resources for each MS-DRG by frequency to determine the weighted 
average resources for each surgical class. For example, assume surgical 
class A includes MS-DRGs 001 and 002 and surgical class B includes MS-
DRGs 003, 004, and 005. Assume also that the average costs of MS-DRG 
001 are higher than that of MS-DRG 003, but the average costs of MS-
DRGs 004 and 005 are higher than the average costs of MS-DRG 002. To 
determine whether surgical class A should be higher or lower than 
surgical class B in the surgical hierarchy, we would weigh the average 
costs of each MS-DRG in the class by frequency (that is, by the number 
of cases in the MS-DRG) to determine average resource consumption for 
the surgical class. The surgical classes would then be ordered from the 
class with the highest average resource utilization to that with the 
lowest, with the exception of ``other O.R. procedures'' as discussed 
below.
    This methodology may occasionally result in assignment of a case 
involving multiple procedures to the lower-weighted MS-DRG (in the 
highest, most resource-intensive surgical class) of the available 
alternatives. However, given that the logic underlying the surgical 
hierarchy provides that the GROUPER search for the procedure in the 
most resource-intensive surgical class, in cases involving multiple 
procedures, this result is sometimes unavoidable.
    We note that, notwithstanding the foregoing discussion, there are a 
few instances when a surgical class with a lower average cost is 
ordered above a surgical class with a higher average cost. For example, 
the ``other O.R. procedures'' surgical class is uniformly ordered last 
in the surgical hierarchy of each MDC in which it occurs, regardless of 
the fact that the average costs for the MS-DRG or MS-DRGs in that 
surgical class may be higher than those for other surgical classes in 
the MDC. The ``other O.R. procedures'' class is a group of procedures 
that are only infrequently related to the diagnoses in the MDC, but are 
still occasionally performed on patients with cases assigned to the MDC 
with these diagnoses. Therefore, assignment to these surgical classes 
should only occur if no other surgical class more closely related to 
the diagnoses in the MDC is appropriate.
    A second example occurs when the difference between the average 
costs for two surgical classes is very small. We have found that small 
differences generally do not warrant reordering of the hierarchy 
because, as a result of reassigning cases on the basis of the hierarchy 
change, the average costs are likely to shift such that the higher-
ordered surgical class has lower average costs than the class ordered 
below it.
    Based on the changes that we are proposing to make for FY 2016, as 
discussed in section II.G.3.e. of the preamble of this FY 2016 IPPS/
LTCH PPS proposed rule, we are proposing to revise the surgical 
hierarchy for MDC 5 (Diseases and Disorders of the Circulatory System). 
Specifically, we are proposing to delete MS-DRG 237 (Major 
Cardiovascular Procedures with MCC) and MS-DRG 238 (Major 
Cardiovascular Procedures without MCC) from the surgical hierarchy. We 
are proposing to sequence proposed new MS-DRG 268 (Aortic and Heart 
Assist Procedures Except Pulsation Balloon with MCC) and proposed new 
MS-DRG 269 (Aortic and Heart Assist Procedures Except Pulsation Balloon 
without MCC) above proposed new MS-DRG 270 (Other Major Cardiovascular 
Procedures with MCC), proposed new MS-DRG 271 (Other Major 
Cardiovascular Procedures with CC), and proposed new MS-DRG 272 (Other 
Major Cardiovascular Procedures without CC/MCC). We are proposing to 
sequence proposed new MS-DRGs 270, 271, and 272 above MS-DRG 239 
(Amputation for Circulatory System Disorders Except Upper Limb & Toe 
with MCC). In addition, we are proposing to sequence proposed new MS-
DRG 273 (Percutaneous Intracardiac Procedures with MCC) and proposed 
new MS-DRG 274 (Percutaneous Intracardiac Procedures without MCC) above 
MS-DRG 246 (Percutaneous Cardiovascular Procedure with Drug-eluting 
Stent with MCC or 4+ Vessels/Stents).
    We are inviting public comments on our proposals.
10. Proposed Changes to the MS-DRG Diagnosis Codes for FY 2016
a. Major Complications or Comorbidities (MCCs) and Complications or 
Comorbidities (CC) Severity Levels for FY 2016
    A complete updated MCC, CC, and Non-CC Exclusion List is available 
via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html as 
follows:
     Table 6I (Complete MCC list);
     Table 6J (Complete CC list); and
     Table 6K (Complete list of CC Exclusions).
b. Coronary Atherosclerosis Due to Calcified Coronary Lesion
    We received a request that we change the severity levels for ICD-9-
CM diagnosis codes 414.2 (Chronic total occlusion of coronary artery) 
and 414.4 (Coronary atherosclerosis due to calcified coronary lesion) 
from non-CCs to MCCs. The ICD-10-CM codes for these diagnoses are 
I25.82 (Chronic total occlusion of coronary artery) and I25.84 
(Coronary atherosclerosis due to calcified coronary lesion), 
respectively, and both of these codes are currently classified as non-
CCs.
    This issue was previously discussed in the FY 2014 IPPS/LTCH PPS 
proposed rule and final rule (78 FR 27522 and 78 FR 50541 through 
50542,

[[Page 24400]]

respectively), and the FY 2015 IPPS/LTCH PPS proposed rule and final 
rule (79 FR 28018 and 28019 and 79 FR 49903 and 49904, respectively).
    We examined claims data from the December 2014 update of the FY 
2014 MedPAR file for ICD-9-CM diagnosis codes 414.2 and 414.4. The 
following table shows our findings.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Cnt 1                     Cnt 2                     Cnt 3
                 SDX                      SDX description       CC  level     Cnt 1         impact      Cnt 2         impact      Cnt 3         impact
--------------------------------------------------------------------------------------------------------------------------------------------------------
414.2...............................  Chronic total occlusion       Non-CC       14,655        1.393       21,222        2.098       20,615        3.046
                                       of coronary artery.
414.4...............................  Coronary                      Non-CC        1,752        1.412        3,238        2.148        3,244        3.053
                                       atherosclerosis due to
                                       calcified coronary
                                       lesion.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We ran the data using the criteria described in the FY 2008 IPPS 
final rule with comment period (72 FR 47169) to determine severity 
levels for procedures in MS-DRGs. The C1 value reflects a patient with 
no other secondary diagnosis or with all other secondary diagnoses that 
are non-CCs. The C2 value reflects a patient with at least one other 
secondary diagnosis that is a CC, but none that is an MCC. The C3 value 
reflects a patient with at least one other secondary diagnosis that is 
an MCC.
    The table above shows that the C1 finding is 1.393 for ICD-9-CM 
diagnosis code 414.2 and the C1 finding is 1.412 for ICD-9-CM diagnosis 
code 414.4. A value close to 1.0 in the C1 field suggests that the 
diagnosis produces the same expected value as a non-CC. A value close 
to 2.0 suggests the condition is more like a CC than a non-CC, but not 
as significant in resource usage as an MCC. A value close to 3.0 
suggests that the condition is expected to consume resources more 
similar to an MCC than a CC or a non-CC. The C2 finding was 2.098 for 
ICD-9-CM diagnosis code 414.2, and the C2 finding was 2.148 for ICD-9-
CM diagnosis code 414.4. A C2 value close to 2.0 suggests the condition 
is more like a CC than a non-CC, but not as significant in resource 
usage as an MCC when there is at least one other secondary diagnosis 
that is a CC but none that is an MCC. While the C1 value of 1.393 for 
ICD-9-CM diagnosis code 414.2 and the C1 value of 1.412 for ICD-9-CM 
diagnosis code 414.4 are above the 1.0 value for a non-CC, these values 
do not support the reclassification of diagnosis codes 414.2 and 414.4 
to MCCs. As stated earlier, a value close to 3.0 suggests the condition 
is expected to consume resources more similar to an MCC than a CC or a 
non-CC. The C2 finding of 2.098 for ICD-9-CM diagnosis code 414.2 and 
the C2 finding of 2.148 for ICD-9-CM diagnosis code 414.4 also do not 
support reclassifying these diagnosis codes to MCCs.
    Our clinical advisors reviewed the data and evaluated these 
conditions. They recommended that we not change the severity level of 
diagnosis codes 414.2 and 414.4 from a non-CC to an MCC. Our clinical 
advisors do not believe that these diagnoses would increase the 
severity of illness level of patients. Considering the C1 and C2 
ratings of both diagnosis codes 414.2 and 414.4 and the input from our 
clinical advisors, we are not proposing to reclassify conditions 
represented by diagnosis codes 414.2 and 414.4 to MCCs. We are 
proposing to maintain both of these conditions as non-CCs. As stated 
earlier, the equivalent ICD-10-CM codes for these conditions are codes 
I25.82 and I25.84, respectively. Therefore, based on the data and 
clinical analysis, we are proposing to maintain ICD-10-CM diagnosis 
codes I25.82 and I25.84 as non-CCs. We are inviting public comments on 
our proposals.
c. Hydronephrosis
    Some ICD-10-CM diagnosis codes express conditions that are normally 
coded in ICD-9-CM using two or more ICD-9-CM diagnosis codes. CMS' goal 
in developing the ICD-10 MS-DRGs was to ensure that a patient case is 
assigned to the same MS-DRG, regardless of whether the patient record 
were to be coded in ICD-9-CM or ICD-10-CM/PCS. When one of the ICD-10-
CM combination codes is used as a principal diagnosis, the cluster of 
ICD-9-CM codes that would be coded on an ICD-9-CM record was evaluated. 
If one of the ICD-9-CM codes in the cluster is a CC or an MCC, the 
single ICD-10-CM combination code used as a principal diagnosis also 
must imply that the CC or MCC is present. Appendix J of the ICD-10 MS-
DRG Definitions Manual Version 32 includes two lists. Part 1 is the 
list of principal diagnosis codes where the ICD-10-CM code is its own 
MCC. Part 2 is the list of principal diagnosis codes where the ICD-10-
CM code is its own CC. Appendix J of the ICD-10 MS-DRG Definitions 
Manual Version 32 is available via the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html.
    We received a request that the ICD-10-CM combination codes for 
hydronephrosis due to ureteral stricture and urinary stone (N13.1 and 
N13.2) be flagged as principal diagnoses that can act as their own CC 
for MS-DRG grouping purposes.
    In ICD-9-CM, code 591 (Hydronephrosis) is classified as a CC. In 
ICD-10-CM, hydronephrosis is reported with a combination code if the 
hydronephrosis is due to a ureteral stricture or urinary stone 
obstruction of N13.1 (Hydronephrosis with ureteral stricture, not 
elsewhere classified) and N13.2 (Hydronephrosis with renal and ureteral 
calculous obstruction). In ICD-10-CM, these two codes (N13.1 and N13.2) 
are classified as CCs, but these codes are not recognized as principal 
diagnoses that act as their own CC (they are not included in the 
Appendix J of the ICD-10 MS-DRG Definitions Manual Version 32).
    We agree with the requestor that ICD-10-CM diagnosis codes N13.1 
and N13.2 should be flagged as principal diagnosis codes that can act 
as their own CC for MS-DRG grouping purposes. Therefore, we are 
proposing that diagnosis codes N13.1 and N13.2 be added to the list of 
principal diagnoses that act as their own CC in Appendix J of the ICD-
10 MS-DRG Definitions Manual Version 32. We are inviting public 
comments on our proposal.
11. Proposed Complications or Comorbidity (CC) Exclusions List for FY 
2016
a. Background of the CC List and the CC Exclusions List
    Under the IPPS MS-DRG classification system, we have developed a 
standard list of diagnoses that are considered CCs. Historically, we

[[Page 24401]]

developed this list using physician panels that classified each 
diagnosis code based on whether the diagnosis, when present as a 
secondary condition, would be considered a substantial complication or 
comorbidity. A substantial complication or comorbidity was defined as a 
condition that, because of its presence with a specific principal 
diagnosis, would cause an increase in the length of stay by at least 1 
day in at least 75 percent of the patients. However, depending on the 
principal diagnosis of the patient, some diagnoses on the basic list of 
complications and comorbidities may be excluded if they are closely 
related to the principal diagnosis. In FY 2008, we evaluated each 
diagnosis code to determine its impact on resource use and to determine 
the most appropriate CC subclassification (non-CC, CC, or MCC) 
assignment. We refer readers to sections II.D.2. and 3. of the preamble 
of the FY 2008 IPPS final rule with comment period for a discussion of 
the refinement of CCs in relation to the MS-DRGs we adopted for FY 2008 
(72 FR 47152 through 47171).
b. Proposed CC Exclusions List for FY 2016
    In the September 1, 1987 final notice (52 FR 33143) concerning 
changes to the DRG classification system, we modified the GROUPER logic 
so that certain diagnoses included on the standard list of CCs would 
not be considered valid CCs in combination with a particular principal 
diagnosis. We created the CC Exclusions List for the following reasons: 
(1) To preclude coding of CCs for closely related conditions; (2) to 
preclude duplicative or inconsistent coding from being treated as CCs; 
and (3) to ensure that cases are appropriately classified between the 
complicated and uncomplicated DRGs in a pair. As we indicated above, we 
developed a list of diagnoses, using physician panels, to include those 
diagnoses that, when present as a secondary condition, would be 
considered a substantial complication or comorbidity. In previous 
years, we have made changes to the list of CCs, either by adding new 
CCs or deleting CCs already on the list.
    In the May 19, 1987 proposed notice (52 FR 18877) and the September 
1, 1987 final notice (52 FR 33154), we explained that the excluded 
secondary diagnoses were established using the following five 
principles:
     Chronic and acute manifestations of the same condition 
should not be considered CCs for one another;
     Specific and nonspecific (that is, not otherwise specified 
(NOS)) diagnosis codes for the same condition should not be considered 
CCs for one another;
     Codes for the same condition that cannot coexist, such as 
partial/total, unilateral/bilateral, obstructed/unobstructed, and 
benign/malignant, should not be considered CCs for one another;
     Codes for the same condition in anatomically proximal 
sites should not be considered CCs for one another; and
     Closely related conditions should not be considered CCs 
for one another.
    The creation of the CC Exclusions List was a major project 
involving hundreds of codes. We have continued to review the remaining 
CCs to identify additional exclusions and to remove diagnoses from the 
master list that have been shown not to meet the definition of a CC.\4\
---------------------------------------------------------------------------

    \4\ We refer readers to the FY 1989 final rule (53 FR 38485, 
September 30, 1988) for the revision made for the discharges 
occurring in FY 1989; the FY 1990 final rule (54 FR 36552, September 
1, 1989) for the FY 1990 revision; the FY 1991 final rule (55 FR 
36126, September 4, 1990) for the FY 1991 revision; the FY 1992 
final rule (56 FR 43209, August 30, 1991) for the FY 1992 revision; 
the FY 1993 final rule (57 FR 39753, September 1, 1992) for the FY 
1993 revision; the FY 1994 final rule (58 FR 46278, September 1, 
1993) for the FY 1994 revisions; the FY 1995 final rule (59 FR 
45334, September 1, 1994) for the FY 1995 revisions; the FY 1996 
final rule (60 FR 45782, September 1, 1995) for the FY 1996 
revisions; the FY 1997 final rule (61 FR 46171, August 30, 1996) for 
the FY 1997 revisions; the FY 1998 final rule (62 FR 45966, August 
29, 1997) for the FY 1998 revisions; the FY 1999 final rule (63 FR 
40954, July 31, 1998) for the FY 1999 revisions; the FY 2001 final 
rule (65 FR 47064, August 1, 2000) for the FY 2001 revisions; the FY 
2002 final rule (66 FR 39851, August 1, 2001) for the FY 2002 
revisions; the FY 2003 final rule (67 FR 49998, August 1, 2002) for 
the FY 2003 revisions; the FY 2004 final rule (68 FR 45364, August 
1, 2003) for the FY 2004 revisions; the FY 2005 final rule (69 FR 
49848, August 11, 2004) for the FY 2005 revisions; the FY 2006 final 
rule (70 FR 47640, August 12, 2005) for the FY 2006 revisions; the 
FY 2007 final rule (71 FR 47870) for the FY 2007 revisions; the FY 
2008 final rule (72 FR 47130) for the FY 2008 revisions; the FY 2009 
final rule (73 FR 48510); the FY 2010 final rule (74 FR 43799); the 
FY 2011 final rule (75 FR 50114); the FY 2012 final rule (76 FR 
51542); the FY 2013 final rule (77 FR 53315); the FY 2014 final rule 
(78 FR 50541), and the FY 2015 final rule (79 FR 49905). In the FY 
2000 final rule (64 FR 41490, July 30, 1999), we did not modify the 
CC Exclusions List because we did not make any changes to the ICD-9-
CM codes for FY 2000.
---------------------------------------------------------------------------

    The ICD-10 MS-DRGs Version 32 CC Exclusion List is included as 
Appendix C in the Definitions Manual available via the Internet on the 
CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html.
    For FY 2016, we are not proposing any changes to the CC Exclusion 
List. Because we are not proposing any changes to the ICD-10 MS-DRGs CC 
Exclusion List for FY 2016, we are not publishing Table 6G (Additions 
to the CC Exclusion List) or Table 6H (Deletions from the CC Exclusion 
List). We have developed Table 6K (Complete List of CC Exclusions), 
which is available only via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Because of the length of Table 6K, we are 
not publishing it in the Addendum to this proposed rule. Each of the 
secondary diagnosis codes for which there is an exclusion is listed in 
Part 1 of Table 6K. Each of these secondary diagnosis codes is 
indicated as a CC or an MCC. If the CC or MCC is allowed with all 
principal diagnoses, the phrase ``NoExcl'' (for no exclusions) follows 
the CC/MCC indicator. Otherwise, a link is given to a collection of 
diagnosis codes which, when used as the principal diagnosis, will cause 
the CC or MCC to be considered as only a non-CC. Part 2 of Table 6K 
lists codes that are assigned as an MCC only for patients discharged 
alive. Otherwise, the codes are assigned as a non-CC.
    A complete updated MCC, CC, and Non-CC Exclusions List is available 
via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
    Because there are no proposed new, revised, or deleted ICD-10-CM 
diagnosis codes for FY 2016, we have not developed Table 6A (New 
Diagnosis Codes), Table 6C (Invalid Diagnosis Codes), or Table 6E 
(Revised Diagnosis Code Titles), for this proposed rule and they are 
not published as part of this proposed rule. We have developed Table 6B 
(New Procedure Codes) for new ICD-10-PCS codes which will be 
implemented on October 1, 2015. Because there are no proposed revised 
or deleted procedure codes for FY 2016, we have not developed Table 6D 
(Invalid Procedure Codes) or Table 6F (Revised Procedure Codes).
    We are not proposing any additions or deletions to the MS-DRG MCC 
List for FY 2016 nor any additions or deletions to the MS-DRG CC List 
for FY 2016. Therefore, for this proposed rule, we have not developed 
Tables 6I.1 (Additions to the MCC List), 6I.2 (Deletions to the MCC 
List), 6J.1 (Additions to the CC List), and 6J.2 (Deletions to the CC 
List), and they are not published as part of this proposed rule. We 
have developed Table 6M.1 (Additions to Principal Diagnosis Is Its Own 
CC) to show the two proposed additions to this list for the two 
principal diagnosis codes acting as their own CC.
    The complete documentation of the ICD-10 MS-DRG Version 32 GROUPER 
logic, including the current CC

[[Page 24402]]

Exclusions List, is available via the Internet on the CMS Web site at: 
http://www.cms.gov/Medicare/Coding/ICD10/ICD-10-MS-DRG-Conversion-Project.html. The complete documentation of the ICD-10 MS-DRG GROUPER 
logic will be available on the CMS Acute Inpatient PPS Web page after 
the issuance of the final rule at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html.
12. Review of Procedure Codes in MS-DRGs 981 Through 983, 984 Through 
986, and 987 Through 989
    Each year, we review cases assigned to former CMS DRG 468 
(Extensive O.R. Procedure Unrelated to Principal Diagnosis), CMS DRG 
476 (Prostatic O.R. Procedure Unrelated to Principal Diagnosis), and 
CMS DRG 477 (Nonextensive O.R. Procedure Unrelated to Principal 
Diagnosis) to determine whether it would be appropriate to change the 
procedures assigned among these CMS DRGs. Under the MS-DRGs that we 
adopted for FY 2008, CMS DRG 468 was split three ways and became MS-
DRGs 981, 982, and 983 (Extensive O.R. Procedure Unrelated to Principal 
Diagnosis with MCC, with CC, and without CC/MCC, respectively). CMS DRG 
476 became MS-DRGs 984, 985, and 986 (Prostatic O.R. Procedure 
Unrelated to Principal Diagnosis with MCC, with CC, and without CC/MCC, 
respectively). CMS DRG 477 became MS-DRGs 987, 988, and 989 
(Nonextensive O.R. Procedure Unrelated to Principal Diagnosis with MCC, 
with CC, and without CC/MCC, respectively).
    MS-DRGs 981 through 983, 984 through 986, and 987 through 989 
(formerly CMS DRGs 468, 476, and 477, respectively) are reserved for 
those cases in which none of the O.R. procedures performed are related 
to the principal diagnosis. These MS-DRGs are intended to capture 
atypical cases, that is, those cases not occurring with sufficient 
frequency to represent a distinct, recognizable clinical group. MS-DRGs 
984 through 986 (previously CMS DRG 476) are assigned to those 
discharges in which one or more of the following prostatic procedures 
are performed and are unrelated to the principal diagnosis:
     60.0 (Incision of prostate);
     60.12 (Open biopsy of prostate);
     60.15 (Biopsy of periprostatic tissue);
     60.18 (Other diagnostic procedures on prostate and 
periprostatic tissue);
     60.21 (Transurethral prostatectomy);
     60.29 (Other transurethral prostatectomy);
     60.61 (Local excision of lesion of prostate);
     60.69 (Prostatectomy, not elsewhere classified);
     60.81 (Incision of periprostatic tissue);
     60.82 (Excision of periprostatic tissue);
     60.93 (Repair of prostate);
     60.94 (Control of (postoperative) hemorrhage of prostate);
     60.95 (Transurethral balloon dilation of the prostatic 
urethra);
     60.96 (Transurethral destruction of prostate tissue by 
microwave thermotherapy);
     60.97 (Other transurethral destruction of prostate tissue 
by other thermotherapy); and
     60.99 (Other operations on prostate).
    All remaining O.R. procedures are assigned to MS-DRGs 981 through 
983 and 987 through 989, with MS-DRGs 987 through 989 assigned to those 
discharges in which the only procedures performed are nonextensive 
procedures that are unrelated to the principal diagnosis.\5\
---------------------------------------------------------------------------

    \5\ The original list of the ICD-9-CM procedure codes for the 
procedures we consider nonextensive procedures, if performed with an 
unrelated principal diagnosis, was published in Table 6C in section 
IV. of the Addendum to the FY 1989 final rule (53 FR 38591). As part 
of the FY 1991 final rule (55 FR 36135), the FY 1992 final rule (56 
FR 43212), the FY 1993 final rule (57 FR 23625), the FY 1994 final 
rule (58 FR 46279), the FY 1995 final rule (59 FR 45336), the FY 
1996 final rule (60 FR 45783), the FY 1997 final rule (61 FR 46173), 
and the FY 1998 final rule (62 FR 45981), we moved several other 
procedures from DRG 468 to DRG 477, and some procedures from DRG 477 
to DRG 468. No procedures were moved in FY 1999, as noted in the 
final rule (63 FR 40962), in the FY 2000 (64 FR 41496), in the FY 
2001 (65 FR 47064), or in the FY 2002 (66 FR 39852). In the FY 2003 
final rule (67 FR 49999), we did not move any procedures from DRG 
477. However, we did move procedure codes from DRG 468 and placed 
them in more clinically coherent DRGs. In the FY 2004 final rule (68 
FR 45365), we moved several procedures from DRG 468 to DRGs 476 and 
477 because the procedures are nonextensive. In the FY 2005 final 
rule (69 FR 48950), we moved one procedure from DRG 468 to 477. In 
addition, we added several existing procedures to DRGs 476 and 477. 
In FY 2006 (70 FR 47317), we moved one procedure from DRG 468 and 
assigned it to DRG 477. In FY 2007, we moved one procedure from DRG 
468 and assigned it to DRGs 479, 553, and 554. In FYs 2008, 2009, 
2010, 2011, 2012, 2013, 2014, and 2015, no procedures were moved, as 
noted in the FY 2008 final rule with comment period (72 FR 46241), 
in the FY 2009 final rule (73 FR 48513), in the FY 2010 final rule 
(74 FR 43796), in the FY 2011 final rule (75 FR 50122), in the FY 
2012 final rule (76 FR 51549), in the FY 2013 final rule (77 FR 
53321), in the FY 2014 final rule (78 FR 50545); and in the FY 2015 
final rule (79 FR 49906).
---------------------------------------------------------------------------

    Our review of MedPAR claims data showed that there are no cases 
that merited movement or should logically be assigned to any of the 
other MDCs. Therefore, for FY 2016, we are not proposing to change the 
procedures assigned among these MS-DRGs.
    We are inviting public comments on our proposal.
a. Moving Procedure Codes From MS-DRGs 981 Through 983 or MS-DRGs 987 
Through 989 Into MDCs
    We annually conduct a review of procedures producing assignment to 
MS-DRGs 981 through 983 (Extensive O.R. procedure unrelated to 
principal diagnosis with MCC, with CC, and without CC/MCC, 
respectively) or MS-DRGs 987 through 989 (Nonextensive O.R. procedure 
unrelated to principal diagnosis with MCC, with CC, and without CC/MCC, 
respectively) on the basis of volume, by procedure, to see if it would 
be appropriate to move procedure codes out of these MS-DRGs into one of 
the surgical MS-DRGs for the MDC into which the principal diagnosis 
falls. The data are arrayed in two ways for comparison purposes. We 
look at a frequency count of each major operative procedure code. We 
also compare procedures across MDCs by volume of procedure codes within 
each MDC.
    We identify those procedures occurring in conjunction with certain 
principal diagnoses with sufficient frequency to justify adding them to 
one of the surgical MS-DRGs for the MDC in which the diagnosis falls. 
As noted above, there are no cases that merited movement or that should 
logically be assigned to any of the other MDCs. Therefore, for FY 2016, 
we are not proposing to remove any procedures from MS-DRGs 981 through 
983 or MS-DRGs 987 through 989 into one of the surgical MS-DRGs for the 
MDC into which the principal diagnosis is assigned.
    We are inviting public comments on our proposal.
b. Reassignment of Procedures Among MS DRGs 981 Through 983, 984 
Through 986, and 987 Through 989
(1) Annual Review of Procedures
    We also annually review the list of ICD-9-CM procedures that, when 
in combination with their principal diagnosis code, result in 
assignment to MS-DRGs 981 through 983, 984 through 986 (Prostatic O.R. 
procedure unrelated to principal diagnosis with MCC, with CC, or 
without CC/MCC, respectively), and 987 through 989, to ascertain 
whether any of those procedures should be reassigned from one of these 
three MS DRGs to another of the three MS-DRGs based on average costs 
and the length of stay. We look at the data for trends such as shifts 
in treatment practice or reporting practice that would make the 
resulting MS-DRG assignment

[[Page 24403]]

illogical. If we find these shifts, we would propose to move cases to 
keep the MS-DRGs clinically similar or to provide payment for the cases 
in a similar manner. Generally, we move only those procedures for which 
we have an adequate number of discharges to analyze the data.
    There are no cases representing shifts in treatment practice or 
reporting practice that would make the resulting MS-DRG assignment 
illogical, or that merited movement so that cases should logically be 
assigned to any of the other MDCs. Therefore, for FY 2016, we are not 
proposing to move any procedure codes among these MS-DRGs.
(2) Review of Cases With Endovascular Embolization Procedures for 
Epistaxis
    During the comment period for the FY 2015 IPPS/LTCH PPS proposed 
rule, we received a public comment expressing concern regarding 
specific procedure codes that are assigned to MS-DRGs 981 through 983; 
984 through 986; and 987 through 989 in relation to our discussion of 
the annual review of these MS-DRGs in section II.G.12. of that proposed 
rule (79 FR 28020). The commenter noted that the endovascular 
embolization of the arteries of the branches of the internal maxillary 
artery is frequently performed for intractable posterior epistaxis 
(nosebleed). The commenter stated that, currently, diagnosis code 784.7 
(Epistaxis) reported with procedure codes 39.75 (Endovascular 
embolization or occlusion of vessel(s) of head or neck using bare 
coils) and 39.76 (Endovascular embolization or occlusion of vessel(s) 
of head or neck using bioactive coils) groups to MS-DRGs 981, 982, and 
983. The commenter indicated that it also found this grouping with the 
ICD-10 MS-DRGs Version 31 using ICD-10-CM diagnosis code R04.0 
(Epistaxis) reported with artery occlusion procedure codes. The 
commenter requested that CMS review these groupings and consider the 
possibility of reassigning these epistaxis cases with endovascular 
embolization procedure codes into a more specific MS-DRG.
    We considered this public comment to be outside of the scope of the 
FY 2015 IPPS/LTCH PPS proposed rule and, therefore, did not address it 
in the FY 2015 IPPS/LTCH PPS final rule. However, we indicated that we 
would consider this public comment for possible proposals in future 
rulemaking as part of our annual review process.
    ICD-10-PCS provides more detailed codes for endovascular 
embolization or occlusion of vessel(s) of head or neck using bare coils 
and bioactive coils which are listed in the following table:

  ICD-10-PCS Codes for Endovascular Embolization or Occlusion of Vessel(s) of Head or Neck Using Bare Coils and
                                                 Bioactive Coils
----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
03LG0BZ.....................................  Occlusion of intracranial artery with bioactive intraluminal
                                               device, open approach.
03LG0DZ.....................................  Occlusion of intracranial artery with intraluminal device, open
                                               approach.
03LG3BZ.....................................  Occlusion of intracranial artery with bioactive intraluminal
                                               device, percutaneous approach.
03LG3DZ.....................................  Occlusion of intracranial artery with intraluminal device,
                                               percutaneous approach.
03LG4BZ.....................................  Occlusion of intracranial artery with bioactive intraluminal
                                               device, percutaneous endoscopic approach.
03LG4DZ.....................................  Occlusion of intracranial artery with intraluminal device,
                                               percutaneous endoscopic approach.
03LH0BZ.....................................  Occlusion of right common carotid artery with bioactive
                                               intraluminal device, open approach.
03LH0DZ.....................................  Occlusion of right common carotid artery with intraluminal device,
                                               open approach.
03LH3BZ.....................................  Occlusion of right common carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03LH3DZ.....................................  Occlusion of right common carotid artery with intraluminal device,
                                               percutaneous approach.
03LH4BZ.....................................  Occlusion of right common carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03LH4DZ.....................................  Occlusion of right common carotid artery with intraluminal device,
                                               percutaneous endoscopic approach.
03LJ0BZ.....................................  Occlusion of left common carotid artery with bioactive
                                               intraluminal device, open approach.
03LJ0DZ.....................................  Occlusion of left common carotid artery with intraluminal device,
                                               open approach.
03LJ3BZ.....................................  Occlusion of left common carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03LJ3DZ.....................................  Occlusion of left common carotid artery with intraluminal device,
                                               percutaneous approach.
03LJ4BZ.....................................  Occlusion of left common carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03LJ4DZ.....................................  Occlusion of left common carotid artery with intraluminal device,
                                               percutaneous endoscopic approach.
03LK0BZ.....................................  Occlusion of right internal carotid artery with bioactive
                                               intraluminal device, open approach.
03LK0DZ.....................................  Occlusion of right internal carotid artery with intraluminal
                                               device, open approach.
03LK3BZ.....................................  Occlusion of right internal carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03LK3DZ.....................................  Occlusion of right internal carotid artery with intraluminal
                                               device, percutaneous approach.
03LK4BZ.....................................  Occlusion of right internal carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03LK4DZ.....................................  Occlusion of right internal carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03LL0BZ.....................................  Occlusion of left internal carotid artery with bioactive
                                               intraluminal device, open approach.
03LL0DZ.....................................  Occlusion of left internal carotid artery with intraluminal
                                               device, open approach.
03LL3BZ.....................................  Occlusion of left internal carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03LL3DZ.....................................  Occlusion of left internal carotid artery with intraluminal
                                               device, percutaneous approach.
03LL4BZ.....................................  Occlusion of left internal carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03LL4DZ.....................................  Occlusion of left internal carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03LM0BZ.....................................  Occlusion of right external carotid artery with bioactive
                                               intraluminal device, open approach.
03LM0DZ.....................................  Occlusion of right external carotid artery with intraluminal
                                               device, open approach.
03LM3BZ.....................................  Occlusion of right external carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03LM3DZ.....................................  Occlusion of right external carotid artery with intraluminal
                                               device, percutaneous approach.
03LM4BZ.....................................  Occlusion of right external carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03LM4DZ.....................................  Occlusion of right external carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03LN0BZ.....................................  Occlusion of left external carotid artery with bioactive
                                               intraluminal device, open approach.
03LN0DZ.....................................  Occlusion of left external carotid artery with intraluminal
                                               device, open approach.
03LN3BZ.....................................  Occlusion of left external carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03LN3DZ.....................................  Occlusion of left external carotid artery with intraluminal
                                               device, percutaneous approach.
03LN4BZ.....................................  Occlusion of left external carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03LN4DZ.....................................  Occlusion of left external carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03LP0BZ.....................................  Occlusion of right vertebral artery with bioactive intraluminal
                                               device, open approach.
03LP0DZ.....................................  Occlusion of right vertebral artery with intraluminal device, open
                                               approach.

[[Page 24404]]

 
03LP3BZ.....................................  Occlusion of right vertebral artery with bioactive intraluminal
                                               device, percutaneous approach.
03LP3DZ.....................................  Occlusion of right vertebral artery with intraluminal device,
                                               percutaneous approach.
03LP4BZ.....................................  Occlusion of right vertebral artery with bioactive intraluminal
                                               device, percutaneous endoscopic approach.
03LP4DZ.....................................  Occlusion of right vertebral artery with intraluminal device,
                                               percutaneous endoscopic approach.
03LQ0BZ.....................................  Occlusion of left vertebral artery with bioactive intraluminal
                                               device, open approach.
03LQ0DZ.....................................  Occlusion of left vertebral artery with intraluminal device, open
                                               approach.
03LQ3BZ.....................................  Occlusion of left vertebral artery with bioactive intraluminal
                                               device, percutaneous approach.
03LQ3DZ.....................................  Occlusion of left vertebral artery with intraluminal device,
                                               percutaneous approach.
03LQ4BZ.....................................  Occlusion of left vertebral artery with bioactive intraluminal
                                               device, percutaneous endoscopic approach.
03LQ4DZ.....................................  Occlusion of left vertebral artery with intraluminal device,
                                               percutaneous endoscopic approach.
03VG0BZ.....................................  Restriction of intracranial artery with bioactive intraluminal
                                               device, open approach.
03VG0DZ.....................................  Restriction of intracranial artery with intraluminal device, open
                                               approach.
03VG3BZ.....................................  Restriction of intracranial artery with bioactive intraluminal
                                               device, percutaneous approach.
03VG3DZ.....................................  Restriction of intracranial artery with intraluminal device,
                                               percutaneous approach.
03VG4BZ.....................................  Restriction of intracranial artery with bioactive intraluminal
                                               device, percutaneous endoscopic approach.
03VG4DZ.....................................  Restriction of intracranial artery with intraluminal device,
                                               percutaneous endoscopic approach.
03VH0BZ.....................................  Restriction of right common carotid artery with bioactive
                                               intraluminal device, open approach.
03VH0DZ.....................................  Restriction of right common carotid artery with intraluminal
                                               device, open approach.
03VH3BZ.....................................  Restriction of right common carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03VH3DZ.....................................  Restriction of right common carotid artery with intraluminal
                                               device, percutaneous approach.
03VH4BZ.....................................  Restriction of right common carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03VH4DZ.....................................  Restriction of right common carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03VJ0BZ.....................................  Restriction of left common carotid artery with bioactive
                                               intraluminal device, open approach.
03VJ0DZ.....................................  Restriction of left common carotid artery with intraluminal
                                               device, open approach.
03VJ3BZ.....................................  Restriction of left common carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03VJ3DZ.....................................  Restriction of left common carotid artery with intraluminal
                                               device, percutaneous approach.
03VJ4BZ.....................................  Restriction of left common carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03VJ4DZ.....................................  Restriction of left common carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03VK0BZ.....................................  Restriction of right internal carotid artery with bioactive
                                               intraluminal device, open approach.
03VK0DZ.....................................  Restriction of right internal carotid artery with intraluminal
                                               device, open approach.
03VK3BZ.....................................  Restriction of right internal carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03VK3DZ.....................................  Restriction of right internal carotid artery with intraluminal
                                               device, percutaneous approach.
03VK4BZ.....................................  Restriction of right internal carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03VK4DZ.....................................  Restriction of right internal carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03VL0BZ.....................................  Restriction of left internal carotid artery with bioactive
                                               intraluminal device, open approach.
03VL0DZ.....................................  Restriction of left internal carotid artery with intraluminal
                                               device, open approach.
03VL3BZ.....................................  Restriction of left internal carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03VL3DZ.....................................  Restriction of left internal carotid artery with intraluminal
                                               device, percutaneous approach.
03VL4BZ.....................................  Restriction of left internal carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03VL4DZ.....................................  Restriction of left internal carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03VM0BZ.....................................  Restriction of right external carotid artery with bioactive
                                               intraluminal device, open approach.
03VM0DZ.....................................  Restriction of right external carotid artery with intraluminal
                                               device, open approach.
03VM3BZ.....................................  Restriction of right external carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03VM3DZ.....................................  Restriction of right external carotid artery with intraluminal
                                               device, percutaneous approach.
03VM4BZ.....................................  Restriction of right external carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03VM4DZ.....................................  Restriction of right external carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03VN0BZ.....................................  Restriction of left external carotid artery with bioactive
                                               intraluminal device, open approach.
03VN0DZ.....................................  Restriction of left external carotid artery with intraluminal
                                               device, open approach.
03VN3BZ.....................................  Restriction of left external carotid artery with bioactive
                                               intraluminal device, percutaneous approach.
03VN3DZ.....................................  Restriction of left external carotid artery with intraluminal
                                               device, percutaneous approach.
03VN4BZ.....................................  Restriction of left external carotid artery with bioactive
                                               intraluminal device, percutaneous endoscopic approach.
03VN4DZ.....................................  Restriction of left external carotid artery with intraluminal
                                               device, percutaneous endoscopic approach.
03VP0BZ.....................................  Restriction of right vertebral artery with bioactive intraluminal
                                               device, open approach.
03VP0DZ.....................................  Restriction of right vertebral artery with intraluminal device,
                                               open approach.
03VP3BZ.....................................  Restriction of right vertebral artery with bioactive intraluminal
                                               device, percutaneous approach.
03VP3DZ.....................................  Restriction of right vertebral artery with intraluminal device,
                                               percutaneous approach.
03VP4BZ.....................................  Restriction of right vertebral artery with bioactive intraluminal
                                               device, percutaneous endoscopic approach.
03VP4DZ.....................................  Restriction of right vertebral artery with intraluminal device,
                                               percutaneous endoscopic approach.
03VQ0BZ.....................................  Restriction of left vertebral artery with bioactive intraluminal
                                               device, open approach.
03VQ0DZ.....................................  Restriction of left vertebral artery with intraluminal device,
                                               open approach.
03VQ3BZ.....................................  Restriction of left vertebral artery with bioactive intraluminal
                                               device, percutaneous approach.
03VQ3DZ.....................................  Restriction of left vertebral artery with intraluminal device,
                                               percutaneous approach.
03VQ4BZ.....................................  Restriction of left vertebral artery with bioactive intraluminal
                                               device, percutaneous endoscopic approach.
03VQ4DZ.....................................  Restriction of left vertebral artery with intraluminal device,
                                               percutaneous endoscopic approach.
03VR0DZ.....................................  Restriction of face artery with intraluminal device, open
                                               approach.
03VR3DZ.....................................  Restriction of face artery with intraluminal device, percutaneous
                                               approach.
03VR4DZ.....................................  Restriction of face artery with intraluminal device, percutaneous
                                               endoscopic approach.
03VS0DZ.....................................  Restriction of right temporal artery with intraluminal device,
                                               open approach.
03VS3DZ.....................................  Restriction of right temporal artery with intraluminal device,
                                               percutaneous approach.
03VS4DZ.....................................  Restriction of right temporal artery with intraluminal device,
                                               percutaneous endoscopic approach.
03VT0DZ.....................................  Restriction of left temporal artery with intraluminal device, open
                                               approach.

[[Page 24405]]

 
03VT3DZ.....................................  Restriction of left temporal artery with intraluminal device,
                                               percutaneous approach.
03VT4DZ.....................................  Restriction of left temporal artery with intraluminal device,
                                               percutaneous endoscopic approach.
03VU0DZ.....................................  Restriction of right thyroid artery with intraluminal device, open
                                               approach.
03VU3DZ.....................................  Restriction of right thyroid artery with intraluminal device,
                                               percutaneous approach.
03VU4DZ.....................................  Restriction of right thyroid artery with intraluminal device,
                                               percutaneous endoscopic approach.
03VV0DZ.....................................  Restriction of left thyroid artery with intraluminal device, open
                                               approach.
03VV3DZ.....................................  Restriction of left thyroid artery with intraluminal device,
                                               percutaneous approach.
03VV4DZ.....................................  Restriction of left thyroid artery with intraluminal device,
                                               percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------

    We examined claims data from the December 2014 update of the FY 
2014 MedPAR file for cases with diagnosis code 784.7 reported with 
procedure codes 39.75 and 39.76 in MS-DRGs 981, 982, and 983. The 
following table shows our findings.

                               Endovascular Embolization Procedures for Epistaxis
----------------------------------------------------------------------------------------------------------------
                                                                                      Average
                             MS-DRG                                  Number of       length of    Average  costs
                                                                       cases           stay
----------------------------------------------------------------------------------------------------------------
MS-DRG 981--All cases...........................................          21,118           12.38         $33,080
MS-DRG 981--Epistaxis cases with principal diagnosis code 784.7                8            6.50          34,655
 and procedure code 39.75.......................................
MS-DRG 981--Epistaxis cases with principal diagnosis code 784.7                2           12.50          50,081
 and procedure code 39.76.......................................
MS-DRG 982--All cases...........................................          13,657            7.14          19,392
MS-DRG 982--Epistaxis cases with principal diagnosis code 784.7               22            3.14          17,725
 and procedure code 39.75.......................................
MS-DRG 982--Epistaxis cases with principal diagnosis code 784.7                2             2.0          11,010
 and procedure code 39.76.......................................
MS-DRG 983--All cases...........................................           2,989            3.60          12,760
MS-DRG 983--Epistaxis cases with principal diagnosis code 784.7                5            2.60          10,532
 and procedure code 39.75.......................................
MS-DRG 983--Epistaxis cases with principal diagnosis code 784.7                4            1.50          16,658
 and procedure code 39.76.......................................
----------------------------------------------------------------------------------------------------------------

    We found only 35 epistaxis cases with procedure code 39.75 reported 
and 8 cases with procedure code 39.76 reported among MS-DRGs 981, 982, 
and 983. The use of endovascular embolizations for epistaxis appears to 
be rare. The average costs for the cases with procedure code 39.75 in 
MS-DRGs 981, 982, and 983 are similar to the average costs for all 
cases in MS-DRGs 981, 982, and 983, respectively. The average costs for 
the cases with procedure code 39.75 in MS-DRGs 981, 982, and 983 were 
$34,655, $17,725, and $10,532, respectively, compared to $33,080, 
$19,392, and $12,760 for all cases in MS-DRGs 981, 982, and 983. The 
average costs for cases with procedure code 39.76 in MS-DRGs 981, 982, 
and 983 were $50,081, $11,010, and $16,658, respectively, and were 
significantly greater than all cases in MS-DRGs 981 and 983. However, 
as stated earlier, there were only 8 cases reported with procedure code 
39.76. As explained previously, MS-DRGs 981, 982, and 983 were created 
for operating room procedures that are unrelated to the principal 
diagnosis. Because there were so few cases reported, this does not 
appear to be a common procedure for epistaxis. There were not enough 
cases to base a change of MS-DRG assignment for these cases.
    Our clinical advisors reviewed this issue and did not identify any 
new MS-DRG assignment that would be more appropriate for these rare 
cases. They advised us to maintain the current MS-DRG structure within 
MS-DRGs 981, 982, and 983.
    Based on the results of the examination of the claims data and the 
recommendations from our clinical advisors, we are not proposing to 
create new MS-DRG assignments for epistaxis cases receiving 
endovascular embolization procedures. We are proposing to maintain the 
current MS-DRG structure for epistaxis cases receiving endovascular 
embolization procedures and are not proposing any updates to MS-DRGs 
981, 982, and 983. We are inviting public comments on our proposal.
c. Adding Diagnosis or Procedure Codes to MDCs
    Based on the review of cases in the MDCs, as described above in 
sections II.G.2. through 7. of the preamble of this proposed rule, we 
are not proposing to add any diagnosis or procedure codes to MDCs for 
FY 2016. We are inviting public comments on our proposal.
13. Proposed Changes to the ICD-9-CM System
a. ICD-10 Coordination and Maintenance Committee
    In September 1985, the ICD-9-CM Coordination and Maintenance 
Committee was formed. This is a Federal interdepartmental committee, 
co-chaired by the National Center for Health Statistics (NCHS), the 
Centers for Disease Control and Prevention, and CMS, charged with 
maintaining and updating the ICD-9-CM system. The final update to ICD-
9-CM codes was to be made on October 1, 2013. Thereafter, the name of 
the Committee was changed to the ICD-10 Coordination and Maintenance 
Committee, effective with

[[Page 24406]]

the March 19-20, 2014 meeting. The ICD-10 Coordination and Maintenance 
Committee addresses updates to the ICD-10-CM, ICD-10-PCS, and ICD-9-CM 
coding systems. The Committee is jointly responsible for approving 
coding changes, and developing errata, addenda, and other modifications 
to the coding systems to reflect newly developed procedures and 
technologies and newly identified diseases. The Committee is also 
responsible for promoting the use of Federal and non-Federal 
educational programs and other communication techniques with a view 
toward standardizing coding applications and upgrading the quality of 
the classification system.
    The official list of ICD-9-CM diagnosis and procedure codes by 
fiscal year can be found on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/codes.html. The official 
list of ICD-10-CM and ICD-10-PCS codes can be found on the CMS Web site 
at: http://www.cms.gov/Medicare/Coding/ICD10/index.html.
    The NCHS has lead responsibility for the ICD-10-CM and ICD-9-CM 
diagnosis codes included in the Tabular List and Alphabetic Index for 
Diseases, while CMS has lead responsibility for the ICD-10-PCS and ICD-
9-CM procedure codes included in the Tabular List and Alphabetic Index 
for Procedures.
    The Committee encourages participation in the above process by 
health-related organizations. In this regard, the Committee holds 
public meetings for discussion of educational issues and proposed 
coding changes. These meetings provide an opportunity for 
representatives of recognized organizations in the coding field, such 
as the American Health Information Management Association (AHIMA), the 
American Hospital Association (AHA), and various physician specialty 
groups, as well as individual physicians, health information management 
professionals, and other members of the public, to contribute ideas on 
coding matters. After considering the opinions expressed at the public 
meetings and in writing, the Committee formulates recommendations, 
which then must be approved by the agencies.
    The Committee presented proposals for coding changes for 
implementation in FY 2016 at a public meeting held on September 23-24, 
2014, and finalized the coding changes after consideration of comments 
received at the meetings and in writing by November 15, 2014.
    The Committee held its 2015 meeting on March 18-19, 2015. It was 
announced at this meeting that any new ICD-10-CM/PCS codes for which 
there was consensus of public support and for which complete tabular 
and indexing changes would be made by May 2015 would be included in the 
October 1, 2015 update to ICD-10-CM/ICD-10-PCS. For FY 2016, there are 
no new, revised, or deleted ICD-10-CM diagnosis codes. For FY 2016, 
there are new ICD-10-PCS procedure codes that are included in Table 6B 
(New Procedure Codes). However, there are no revised or deleted ICD-10-
PCS procedure codes. There also are no new ICD-9-CM diagnosis or 
procedure codes because ICD-9-CM will be replaced by ICD-10-CM/ICD-10-
PCS for services provided on or after October 1, 2015.
    Copies of the agenda, handouts, and access to the live stream 
videos for the procedure codes discussions at the Committee's September 
23-24, 2014 meeting and March 18-19, 2015 meeting can be obtained from 
the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/
icd9ProviderDiagnosticCodes/03_meetings.asp. The agenda, handouts and 
minutes of the diagnosis codes discussions at the September 23-24, 2014 
meeting and March 18-19, 2015 meeting are found at: http://www.cdc.gov/nchs/icd/icd9cm-maintenance.html. These Web sites also provide detailed 
information about the Committee, including information on requesting a 
new code, attending a Committee meeting, timeline requirements and 
meeting dates.
    We encourage commenters to address suggestions on coding issues 
involving diagnosis codes to: Donna Pickett, Co-Chairperson, ICD-10 
Coordination and Maintenance Committee, NCHS, Room 2402, 3311 Toledo 
Road, Hyattsville, MD 20782. Comments may be sent by Email to: 
[email protected].
    Questions and comments concerning the procedure codes should be 
addressed to: Patricia Brooks, Co-Chairperson, ICD-10 Coordination and 
Maintenance Committee, CMS, Center for Medicare, Hospital and 
Ambulatory Policy Group, Division of Acute Care, C4-08-06, 7500 
Security Boulevard, Baltimore, MD 21244-1850. Comments may be sent by 
Email to: [email protected].
    In the September 7, 2001 final rule implementing the IPPS new 
technology add-on payments (66 FR 46906), we indicated we would attempt 
to include proposals for procedure codes that would describe new 
technology discussed and approved at the Spring meeting as part of the 
code revisions effective the following October.
    Section 503(a) of Public Law 108-173 included a requirement for 
updating ICD-9-CM codes twice a year instead of a single update on 
October 1 of each year. This requirement was included as part of the 
amendments to the Act relating to recognition of new technology under 
the IPPS. Section 503(a) amended section 1886(d)(5)(K) of the Act by 
adding a clause (vii) which states that the Secretary shall provide for 
the addition of new diagnosis and procedure codes on April 1 of each 
year, but the addition of such codes shall not require the Secretary to 
adjust the payment (or diagnosis-related group classification) until 
the fiscal year that begins after such date. This requirement improves 
the recognition of new technologies under the IPPS system by providing 
information on these new technologies at an earlier date. Data will be 
available 6 months earlier than would be possible with updates 
occurring only once a year on October 1.
    While section 1886(d)(5)(K)(vii) of the Act states that the 
addition of new diagnosis and procedure codes on April 1 of each year 
shall not require the Secretary to adjust the payment, or DRG 
classification, under section 1886(d) of the Act until the fiscal year 
that begins after such date, we have to update the DRG software and 
other systems in order to recognize and accept the new codes. We also 
publicize the code changes and the need for a mid-year systems update 
by providers to identify the new codes. Hospitals also have to obtain 
the new code books and encoder updates, and make other system changes 
in order to identify and report the new codes.
    The ICD-10 (previously the ICD-9-CM) Coordination and Maintenance 
Committee holds its meetings in the spring and fall in order to update 
the codes and the applicable payment and reporting systems by October 1 
of each year. Items are placed on the agenda for the Committee meeting 
if the request is received at least 2 months prior to the meeting. This 
requirement allows time for staff to review and research the coding 
issues and prepare material for discussion at the meeting. It also 
allows time for the topic to be publicized in meeting announcements in 
the Federal Register as well as on the CMS Web site. The public decides 
whether or not to attend the meeting based on the topics listed on the 
agenda. Final decisions on code title revisions are currently made by 
March 1 so that these titles can be included in the IPPS proposed rule. 
A complete addendum describing details of all diagnosis and procedure 
coding changes, both tabular and index, is

[[Page 24407]]

published on the CMS and NCHS Web sites in May of each year. Publishers 
of coding books and software use this information to modify their 
products that are used by health care providers. This 5-month time 
period has proved to be necessary for hospitals and other providers to 
update their systems.
    A discussion of this timeline and the need for changes are included 
in the December 4-5, 2005 ICD-9-CM Coordination and Maintenance 
Committee Meeting minutes. The public agreed that there was a need to 
hold the fall meetings earlier, in September or October, in order to 
meet the new implementation dates. The public provided comment that 
additional time would be needed to update hospital systems and obtain 
new code books and coding software. There was considerable concern 
expressed about the impact this new April update would have on 
providers.
    In the FY 2005 IPPS final rule, we implemented section 
1886(d)(5)(K)(vii) of the Act, as added by section 503(a) of Public Law 
108-173, by developing a mechanism for approving, in time for the April 
update, diagnosis and procedure code revisions needed to describe new 
technologies and medical services for purposes of the new technology 
add-on payment process. We also established the following process for 
making these determinations. Topics considered during the Fall ICD-10 
(previously ICD-9-CM) Coordination and Maintenance Committee meeting 
are considered for an April 1 update if a strong and convincing case is 
made by the requestor at the Committee's public meeting. The request 
must identify the reason why a new code is needed in April for purposes 
of the new technology process. The participants at the meeting and 
those reviewing the Committee meeting summary report are provided the 
opportunity to comment on this expedited request. All other topics are 
considered for the October 1 update. Participants at the Committee 
meeting are encouraged to comment on all such requests. There were no 
requests approved for an expedited April l, 2015 implementation of a 
code at the September 23-24, 2014 Committee meeting. Therefore, there 
were no new codes implemented on April 1, 2015.
    ICD-9-CM addendum and code title information is published on the 
CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/index.html?redirect=/
icd9ProviderDiagnosticCodes/01overview.asp#TopofPage. ICD-10-CM and 
ICD-10-PCS addendum and code title information is published on the CMS 
Web site at http://www.cms.gov/Medicare/Coding/ICD10/index.html. 
Information on ICD-10-CM diagnosis codes, along with the Official ICD-
10-CM Coding Guidelines, can also be found on the CDC Web site at: 
http://www.cdc.gov/nchs/index.html. Information on new, revised, and 
deleted ICD-10-CM/ICD-10-PCS codes is also provided to the AHA for 
publication in the Coding Clinic for ICD-10. AHA also distributes 
information to publishers and software vendors.
    CMS also sends copies of all ICD-10-CM and ICD-10-PCS coding 
changes to its Medicare contractors for use in updating their systems 
and providing education to providers.
    The code titles are adopted as part of the ICD-10 (previously ICD-
9-CM) Coordination and Maintenance Committee process. Therefore, 
although we publish the code titles in the IPPS proposed and final 
rules, they are not subject to comment in the proposed or final rules.
b. Code Freeze
    In the January 16, 2009 ICD-10-CM and ICD-10-PCS final rule (74 FR 
3340), there was a discussion of the need for a partial or total freeze 
in the annual updates to both ICD-9-CM and ICD-10-CM and ICD-10-PCS 
codes. The public comment addressed in that final rule stated that the 
annual code set updates should cease l year prior to the implementation 
of ICD-10. The commenters stated that this freeze of code updates would 
allow for instructional and/or coding software programs to be designed 
and purchased early, without concern that an upgrade would take place 
immediately before the compliance date, necessitating additional 
updates and purchases.
    HHS responded to comments in the ICD-10 final rule that the ICD-9-
CM Coordination and Maintenance Committee has jurisdiction over any 
action impacting the ICD-9-CM and ICD-10 code sets. Therefore, HHS 
indicated that the issue of consideration of a moratorium on updates to 
the ICD-9-CM, ICD-10-CM, and ICD-10-PCS code sets in anticipation of 
the adoption of ICD-10-CM and ICD-10-PCS would be addressed through the 
Committee at a future public meeting.
    The code freeze was discussed at multiple meetings of the ICD-9-CM 
Coordination and Maintenance Committee and public comment was actively 
solicited. The Committee evaluated all comments from participants 
attending the Committee meetings as well as written comments that were 
received. The Committee also considered the delay in implementation of 
ICD-10 until October 1, 2014. There was an announcement at the 
September 19, 2012 ICD-9-CM Coordination and Maintenance Committee 
meeting that a partial freeze of both ICD-9-CM and ICD-10 codes will be 
implemented as follows:
     The last regular annual update to both ICD-9-CM and ICD-10 
code sets was made on October 1, 2011.
     On October 1, 2012 and October 1, 2013, there were to be 
only limited code updates to both ICD-9-CM and ICD-10 code sets to 
capture new technology and new diseases.
     On October 1, 2014, there were to be only limited code 
updates to ICD-10 code sets to capture new technology and diagnoses as 
required by section 503(a) of Public Law 108-173. There were to be no 
updates to ICD-9-CM on October 1, 2014.
     On October 1, 2015, one year after the originally 
scheduled implementation of ICD-10, regular updates to ICD-10 were to 
begin.
    On May 15, 2014, CMS posted an updated Partial Code Freeze schedule 
on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/ICD-9-CM-Coordination-and-Maintenance-Committee-Meetings.html. This updated 
schedule provided information on the extension of the partial code 
freeze until 1 year after the implementation of ICD-10. As stated 
earlier, on April 1, 2014, the Protecting Access to Medicare Act of 
2014 (PAMA) (Pub. L. 113-93) was enacted, which specified that the 
Secretary may not adopt ICD-10 prior to October 1, 2015. Accordingly, 
the U.S. Department of Health and Human Services released a final rule 
in the Federal Register on August 4, 2014 (79 FR 45128 through 45134) 
that included a new compliance date that requires the use of ICD-10 
beginning October 1, 2015. The August 4, 2014 final rule is available 
for viewing on the Internet at: http://www.gpo.gov/fdsys/pkg/FR-2014-08-04/pdf/2014-18347.pdf. That final rule also requires HIPAA covered 
entities to continue to use ICD-9-CM through September 30, 2015. 
Accordingly, the updated schedule for the partial code freeze is as 
follows:
     The last regular annual updates to both ICD-9-CM and ICD-
10 code sets were made on October 1, 2011.
     On October 1, 2012, October 1, 2013, and October 1, 2014, 
there were only limited code updates to both the ICD-9-CM and ICD-10 
code sets to capture new technologies and diseases as required by 
section 1886(d)(5)(K) of the Act.

[[Page 24408]]

     On October 1, 2015, there will be only limited code 
updates to ICD-10 code sets to capture new technologies and diagnoses 
as required by section 1886(d)(5)(K) of the Act. There will be no 
updates to ICD-9-CM, as it will no longer be used for reporting.
     On October 1, 2016 (1 year after implementation of ICD-
10), regular updates to ICD-10 will begin.
    The ICD-10 (previously ICD-9-CM) Coordination and Maintenance 
Committee announced that it would continue to meet twice a year during 
the freeze. At these meetings, the public will be encouraged to comment 
on whether or not requests for new diagnosis and procedure codes should 
be created based on the need to capture new technology and new 
diseases. Any code requests that do not meet the criteria will be 
evaluated for implementation within ICD-10 one year after the 
implementation of ICD-10, once the partial freeze is ended.
    Complete information on the partial code freeze and discussions of 
the issues at the Committee meetings can be found on the ICD-10 
Coordination and Maintenance Committee Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/meetings.html. A summary of 
the September 19, 2012 Committee meeting, along with both written and 
audio transcripts of this meeting, is posted on the Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials-Items/2012-09-19-MeetingMaterials.html.
    This partial code freeze has dramatically decreased the number of 
codes created each year as shown by the following information.

                   Total Number of Codes and Changes in Total Number of Codes per Fiscal Year
----------------------------------------------------------------------------------------------------------------
                        ICD-9-CM Codes                                   ICD-10-CM and ICD-10-PCS Codes
----------------------------------------------------------------------------------------------------------------
            Fiscal Year                 Number       Change           Fiscal Year          Number       Change
----------------------------------------------------------------------------------------------------------------
FY 2009 (October 1, 2008):           ...........  ............  FY 2009:
    Diagnoses......................       14,025          348      ICD-10-CM..........       68,069           +5
    Procedures.....................        3,824           56      ICD-10-PCS.........       72,589      -14,327
FY 2010 (October 1, 2009):           ...........  ............  FY 2010:
    Diagnoses......................       14,315          290      ICD-10-CM..........       69,099       +1,030
    Procedures.....................        3,838           14      ICD-10-PCS.........       71,957         -632
FY 2011(October 1, 2010):
    Diagnoses......................       14,432          117      ICD-10-CM..........       69,368         +269
    Procedures.....................        3,859           21      ICD-10-PCS.........       72,081         +124
FY 2012 (October 1, 2011):           ...........  ............  FY 2012:
    Diagnoses......................       14,567          135      ICD-10-CM..........       69,833         +465
    Procedures.....................        3,877           18      ICD-10-PCS.........       71,918         -163
FY 2013 (October 1, 2012):           ...........  ............  FY 2013:
    Diagnoses......................       14,567            0      ICD-10-CM..........       69,832           -1
    Procedures.....................        3,878            1      ICD-10-PCS.........       71,920           +2
FY 2014 (October 1, 2013):           ...........  ............  FY 2014:
    Diagnoses......................       14,567            0      ICD-10-CM..........       69,823           -9
    Procedures.....................        3,882            4      ICD-10-PCS.........       71,924           +4
FY 2015 (October 1, 2014):           ...........  ............  FY 2015:
    Diagnoses......................       14,567            0      ICD-10-CM..........       69,823            0
    Procedures.....................        3,882            0      ICD-10-PCS.........       71,924            0
FY 2016 (October 1, 2015):           ...........  ............  FY 2016:
    Diagnoses......................       14,567            0      ICD-10-CM..........       69,823            0
    Procedures.....................        3,882            0      ICD-10-PCS.........       71,962          +38
----------------------------------------------------------------------------------------------------------------

    As mentioned earlier, the public is provided the opportunity to 
comment on any requests for new diagnosis or procedure codes discussed 
at the ICD-10 Coordination and Maintenance Committee meeting. The 
public has supported only a limited number of new codes during the 
partial code freeze, as can be seen by data shown above. We have gone 
from creating several hundred new codes each year to creating only a 
limited number of new ICD-9-CM and ICD-10 codes.
    At the September 23-24, 2014 and March 18-19, 2015 Committee 
meetings, we discussed any requests we had received for new ICD-10-CM 
diagnosis and ICD-10-PCS procedure codes that were to be implemented on 
October 1, 2015. We did not discuss ICD-9-CM codes. The public was 
given the opportunity to comment on whether or not new ICD-10-CM and 
ICD-10-PCS codes should be created, based on the partial code freeze 
criteria. The public was to use the criteria as to whether codes were 
needed to capture new diagnoses or new technologies. If the codes do 
not meet those criteria for implementation during the partial code 
freeze, consideration was to be given as to whether the codes should be 
created after the partial code freeze ends 1 year after the 
implementation of ICD-10-CM/PCS. We invited public comments on any code 
requests discussed at the September 23-24, 2014 and March 18-19, 2015 
Committee meetings for implementation as part of the October 1, 2015 
update. The deadline for commenting on code proposals discussed at the 
September 23-24, 2014 Committee meeting was November 21, 2014. The 
deadline for commenting on code proposals discussed at the March 18-19, 
2015 Committee meeting was April 17, 2015.
14. Other Proposed Policy Changes: Replaced Devices Offered Without 
Cost or With a Credit
a. Background
    In the FY 2008 IPPS final rule with comment period (72 FR 47246 
through 47251), we discussed the topic of Medicare payment for devices 
that are replaced without cost or where credit for a replaced device is 
furnished to the hospital. We implemented a policy to reduce a 
hospital's IPPS payment for certain MS-DRGs where the implantation of a 
device that has been recalled determined the base MS-DRG assignment. We 
specified that if a hospital received a credit for a recalled device 
equal to 50 percent or more of the cost of the device, we would reduce

[[Page 24409]]

a hospital's IPPS payment for those MS-DRGs.
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51556 and 51557), we 
clarified this policy to state that the policy applies if the hospital 
received a credit equal to 50 percent or more of the cost of the 
replacement device and issued instructions to hospitals accordingly.
b. Request for Clarification on Policy Relating to ``Device-Dependent'' 
MS-DRGs
    After publication of the FY 2015 IPPS/LTCH PPS final rule, we 
received a request to clarify the list of ``device-dependent'' MS-DRGs 
subject to the policy for payment under the IPPS for replaced devices 
offered without cost or with a credit. Specifically, a requestor noted 
that ICD-9-CM procedure codes that previously grouped to MS-DRGs 216 
through 221 (Cardiac Valve & Other Major Cardiothoracic Procedure with 
and without Cardiac Catheterization, with MCC, with CC, without CC/MCC, 
respectively) and were subject to the policy for payment under the IPPS 
as ``device-dependent'' MS-DRGs had been reassigned to new MS-DRGs 266 
and 267 (Endovascular Cardiac Valve Replacement with MCC and without 
MCC, respectively). The requestor suggested that MS-DRGs 266 and 267 
also should be considered ``device-dependent'' MS-DRGs and added to the 
list of MS-DRGs subject to the IPPS payment policy for replaced devices 
offered without cost or with a credit.
    As noted by the requestor, as final policy for FY 2015, certain 
ICD-9-CM procedure codes that previously grouped to MS-DRGs 216 through 
221, which are on the list of MS-DRGs subject to the policy for payment 
under the IPPS for replaced devices offered without cost or with a 
credit, were reassigned to MS-DRGs 266 and 267. We agree that MS-DRGs 
266 and 267 should be included in the list of ``device-dependent'' MS-
DRGs subject to the IPPS policy. We generally map new MS-DRGs onto the 
list when they are formed from procedures previously assigned to MS-
DRGs that are already on the list. Therefore, we are proposing to add 
MS-DRGs 266 and 267 to the list of ``device dependent'' MS-DRGs subject 
to the policy for payment under the IPPS for replaced devices offered 
without cost or with a credit.
    In addition, as discussed in section II.G.4.e. of the preamble of 
this proposed rule, for FY 2016, we are proposing to delete MS-DRGs 237 
and 238 (Major Cardiovascular Procedures with MCC and without MCC, 
respectively) and create new MS-DRGs 268 and 269 (Aortic and Heart 
Assist Procedures Except Pulsation Balloon with MCC and without MCC, 
respectively), as well as new MS-DRGs 270, 271, and 272 (Other Major 
Cardiovascular Procedures with MCC, with CC, and without CC/MCC, 
respectively). Currently, MS-DRGs 237 and 238 are on the list of MS-
DRGs subject to the policy for payment under the IPPS for replaced 
devices offered without cost or with a credit. As stated previously, we 
generally map new MS-DRGs onto the list when they are formed from 
procedures previously assigned to MS-DRGs that are already on the list. 
Therefore, if finalized, we also would add proposed new MS-DRGs 268 
through 272 to the list of MS-DRGs subject to the policy for payment 
under the IPPS for replaced devices offered without cost or with a 
credit.
    In summary, we are proposing to add MS-DRGs 266 and 267 to the list 
of MS-DRGs subject to the policy for payment under the IPPS for 
replaced devices offered without cost or with a credit, and if the 
applicable proposed MS-DRG changes are finalized, to also remove 
existing MS-DRGs 237 and 238 and add proposed new MS-DRGs 268 through 
272. The proposed list of MS-DRGs to be subject to the IPPS policy for 
replaced devices offered without cost or with a credit for FY 2016 is 
displayed below.

Proposed List of MS-DRGs Subject to the IPPS Policy for Replaced Devices
                  Offered Without Cost or With a Credit
------------------------------------------------------------------------
        MDC          MS-DRG                  MS-DRG Title
------------------------------------------------------------------------
PreMDC............  001.....  Heart Transplant or Implant of Heart
                               Assist System with MCC.
PreMDC............  002.....  Heart Transplant or Implant of Heart
                               Assist System without MCC.
MDC 01............  023.....  Craniotomy with Major Device Implant/Acute
                               Complex CNS PDX with MCC or Chemo
                               Implant.
MDC 01............  024.....  Craniotomy with Major Device Implant/Acute
                               Complex CNS PDX without MCC.
MDC 01............  025.....  Craniotomy & Endovascular Intracranial
                               Procedures with MCC.
MDC 01............  026.....  Craniotomy & Endovascular Intracranial
                               Procedures with CC.
MDC 01............  027.....  Craniotomy & Endovascular Intracranial
                               Procedures without CC/MCC.
MDC 01............  040.....  Peripheral/Cranial Nerve & Other Nervous
                               System Procedures with MCC.
MDC 01............  041.....  Peripheral/Cranial Nerve & Other Nervous
                               System Procedures with CC or Peripheral
                               Neurostimulation.
MDC 01............  042.....  Peripheral/Cranial Nerve & Other Nervous
                               System Procedures without CC/MCC.
MDC 03............  129.....  Major Head & Neck Procedures with CC/MCC
                               or Major Device.
MDC 03............  130.....  Major Head & Neck Procedures without CC/
                               MCC.
MDC 05............  215.....  Other Heart Assist System Implant.
MDC 05............  216.....  Cardiac Valve & Other Major Cardiothoracic
                               Procedures with Cardiac Catheterization
                               with MCC.
MDC 05............  217.....  Cardiac Valve & Other Major Cardiothoracic
                               Procedures with Cardiac Catheterization
                               with CC.
MDC 05............  218.....  Cardiac Valve & Other Major Cardiothoracic
                               Procedures with Cardiac Catheterization
                               without CC/MCC.
MDC 05............  219.....  Cardiac Valve & Other Major Cardiothoracic
                               Procedures without Cardiac
                               Catheterization with MCC.
MDC 05............  220.....  Cardiac Valve & Other Major Cardiothoracic
                               Procedures without Cardiac
                               Catheterization with CC.
MDC 05............  221.....  Cardiac Valve & Other Major Cardiothoracic
                               Procedures without Cardiac
                               Catheterization without CC/MCC.
MDC 05............  222.....  Cardiac Defibrillator Implant with Cardiac
                               Catheterization with AMI/HF/Shock with
                               MCC.
MDC 05............  223.....  Cardiac Defibrillator Implant with Cardiac
                               Catheterization with AMI/HF/Shock without
                               MCC.
MDC 05............  224.....  Cardiac Defibrillator Implant with Cardiac
                               Catheterization without AMI/HF/Shock with
                               MCC.
MDC 05............  225.....  Cardiac Defibrillator Implant with Cardiac
                               Catheterization without AMI/HF/Shock
                               without MCC.
MDC 05............  226.....  Cardiac Defibrillator Implant without
                               Cardiac Catheterization with MCC.
MDC 05............  227.....  Cardiac Defibrillator Implant without
                               Cardiac Catheterization without MCC.
MDC 05............  242.....  Permanent Cardiac Pacemaker Implant with
                               MCC.
MDC 05............  243.....  Permanent Cardiac Pacemaker Implant with
                               CC.
MDC 05............  244.....  Permanent Cardiac Pacemaker Implant
                               without CC/MCC.
MDC 05............  245.....  AICD Generator Procedures.
MDC 05............  258.....  Cardiac Pacemaker Device Replacement with
                               MCC.

[[Page 24410]]

 
MDC 05............  259.....  Cardiac Pacemaker Device Replacement
                               without MCC.
MDC 05............  260.....  Cardiac Pacemaker Revision Except Device
                               Replacement with MCC.
MDC 05............  261.....  Cardiac Pacemaker Revision Except Device
                               Replacement with CC.
MDC 05............  262.....  Cardiac Pacemaker Revision Except Device
                               Replacement without CC/MCC.
MDC 05............  265.....  AICD Lead Procedures.
MDC 05............  266.....  Endovascular Cardiac Valve Replacement
                               with MCC.
MDC 05............  267.....  Endovascular Cardiac Valve Replacement
                               without MCC.
MDC 05............  268.....  Aortic and Heart Assist Procedures Except
                               Pulsation Balloon with MCC.
MDC 05............  269.....  Aortic and Heart Assist Procedures Except
                               Pulsation Balloon without MCC.
MDC 05............  270.....  Other Major Cardiovascular Procedures with
                               MCC.
MDC 05............  271.....  Other Major Cardiovascular Procedures with
                               CC.
MDC 05............  272.....  Other Major Cardiovascular Procedures
                               without CC/MCC.
MDC 08............  461.....  Bilateral or Multiple Major Joint
                               Procedures of Lower Extremity with MCC.
MDC 08............  462.....  Bilateral or Multiple Major Joint
                               Procedures of Lower Extremity without
                               MCC.
MDC 08............  466.....  Revision of Hip or Knee Replacement with
                               MCC.
MDC 08............  467.....  Revision of Hip or Knee Replacement with
                               CC.
MDC 08............  468.....  Revision of Hip or Knee Replacement
                               without CC/MCC.
MDC 08............  469.....  Major Joint Replacement or Reattachment of
                               Lower Extremity with MCC.
MDC 08............  470.....  Major Joint Replacement or Reattachment of
                               Lower Extremity without MCC.
------------------------------------------------------------------------

    We are inviting public comments on our proposed list of MS-DRGs to 
be subject to the IPPS policy for replaced devices offered without cost 
or with a credit for FY 2016. The final list will be included in the FY 
2016 IPPS/LTCH PPS final rule and also will be issued to providers in 
the form of a Change Request (CR).

H. Recalibration of the Proposed FY 2016 MS-DRG Relative Weights

1. Data Sources for Developing the Relative Weights
    In developing the proposed FY 2016 system of weights, we used two 
data sources: Claims data and cost report data. As in previous years, 
the claims data source is the MedPAR file. This file is based on fully 
coded diagnostic and procedure data for all Medicare inpatient hospital 
bills. The FY 2014 MedPAR data used in this proposed rule include 
discharges occurring on October 1, 2013, through September 30, 2014, 
based on bills received by CMS through December 31, 2014, from all 
hospitals subject to the IPPS and short-term, acute care hospitals in 
Maryland (which at that time were under a waiver from the IPPS). The FY 
2014 MedPAR file used in calculating the proposed relative weights 
includes data for approximately 9,638,230 Medicare discharges from IPPS 
providers. Discharges for Medicare beneficiaries enrolled in a Medicare 
Advantage managed care plan are excluded from this analysis. These 
discharges are excluded when the MedPAR ``GHO Paid'' indicator field on 
the claim record is equal to ``1'' or when the MedPAR DRG payment 
field, which represents the total payment for the claim, is equal to 
the MedPAR ``Indirect Medical Education (IME)'' payment field, 
indicating that the claim was an ``IME only'' claim submitted by a 
teaching hospital on behalf of a beneficiary enrolled in a Medicare 
Advantage managed care plan. In addition, the December 31, 2014 update 
of the FY 2014 MedPAR file complies with version 5010 of the X12 HIPAA 
Transaction and Code Set Standards, and includes a variable called 
``claim type.'' Claim type ``60'' indicates that the claim was an 
inpatient claim paid as fee-for-service. Claim types ``61,'' ``62,'' 
``63,'' and ``64'' relate to encounter claims, Medicare Advantage IME 
claims, and HMO no-pay claims. Therefore, the calculation of the 
proposed relative weights for FY 2016 also excludes claims with claim 
type values not equal to ``60.'' The data exclude CAHs, including 
hospitals that subsequently became CAHs after the period from which the 
data were taken. We note that the proposed FY 2016 relative weights are 
based on the ICD-9-CM diagnoses and procedures codes from the MedPAR 
claims data, grouped through the ICD-9-CM version of the FY 2016 
GROUPER (Version 33). The second data source used in the cost-based 
relative weighting methodology is the Medicare cost report data files 
from the HCRIS. Normally, we use the HCRIS dataset that is 3 years 
prior to the IPPS fiscal year. Specifically, we used cost report data 
from the December 31, 2014 update of the FY 2013 HCRIS for calculating 
the proposed FY 2016 cost-based relative weights.
2. Methodology for Calculation of the Proposed Relative Weights
    As we explain in section II.E.3. of the preamble of this proposed 
rule, we calculated the FY 2016 relative weights based on 19 CCRs, as 
we did for FY 2015. The methodology we used to calculate the proposed 
FY 2016 MS-DRG cost-based relative weights based on claims data in the 
FY 2014 MedPAR file and data from the FY 2013 Medicare cost reports is 
as follows:
     To the extent possible, all the claims were regrouped 
using the proposed FY 2016 MS-DRG classifications discussed in sections 
II.B. and II.G. of the preamble of this proposed rule.
     The transplant cases that were used to establish the 
relative weights for heart and heart-lung, liver and/or intestinal, and 
lung transplants (MS-DRGs 001, 002, 005, 006, and 007, respectively) 
were limited to those Medicare-approved transplant centers that have 
cases in the FY 2014 MedPAR file. (Medicare coverage for heart, heart-
lung, liver and/or intestinal, and lung transplants is limited to those 
facilities that have received approval from CMS as transplant centers.)
     Organ acquisition costs for kidney, heart, heart-lung, 
liver, lung, pancreas, and intestinal (or multivisceral organs) 
transplants continue to be paid on a reasonable cost basis. Because 
these acquisition costs are paid separately from the prospective 
payment rate, it is necessary to subtract the acquisition charges from 
the total charges on each transplant bill that showed acquisition 
charges before computing the average

[[Page 24411]]

cost for each MS-DRG and before eliminating statistical outliers.
     Claims with total charges or total lengths of stay less 
than or equal to zero were deleted. Claims that had an amount in the 
total charge field that differed by more than $10.00 from the sum of 
the routine day charges, intensive care charges, pharmacy charges, 
special equipment charges, therapy services charges, operating room 
charges, cardiology charges, laboratory charges, radiology charges, 
other service charges, labor and delivery charges, inhalation therapy 
charges, emergency room charges, blood charges, and anesthesia charges 
were also deleted.
     At least 92.1 percent of the providers in the MedPAR file 
had charges for 14 of the 19 cost centers. All claims of providers that 
did not have charges greater than zero for at least 14 of the 19 cost 
centers were deleted. In other words, a provider must have no more than 
five blank cost centers. If a provider did not have charges greater 
than zero in more than five cost centers, the claims for the provider 
were deleted. (We refer readers to the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 49911) for the edit threshold related to FY 2015.)
     Statistical outliers were eliminated by removing all cases 
that were beyond 3.0 standard deviations from the geometric mean of the 
log distribution of both the total charges per case and the total 
charges per day for each MS-DRG.
     Effective October 1, 2008, because hospital inpatient 
claims include a POA indicator field for each diagnosis present on the 
claim, only for purposes of relative weight-setting, the POA indicator 
field was reset to ``Y'' for ``Yes'' for all claims that otherwise have 
an ``N'' (No) or a ``U'' (documentation insufficient to determine if 
the condition was present at the time of inpatient admission) in the 
POA field.
    Under current payment policy, the presence of specific HAC codes, 
as indicated by the POA field values, can generate a lower payment for 
the claim. Specifically, if the particular condition is present on 
admission (that is, a ``Y'' indicator is associated with the diagnosis 
on the claim), it is not a HAC, and the hospital is paid for the higher 
severity (and, therefore, the higher weighted MS-DRG). If the 
particular condition is not present on admission (that is, an ``N'' 
indicator is associated with the diagnosis on the claim) and there are 
no other complicating conditions, the DRG GROUPER assigns the claim to 
a lower severity (and, therefore, the lower weighted MS-DRG) as a 
penalty for allowing a Medicare inpatient to contract a HAC. While the 
POA reporting meets policy goals of encouraging quality care and 
generates program savings, it presents an issue for the relative 
weight-setting process. Because cases identified as HACs are likely to 
be more complex than similar cases that are not identified as HACs, the 
charges associated with HAC cases are likely to be higher as well. 
Therefore, if the higher charges of these HAC claims are grouped into 
lower severity MS-DRGs prior to the relative weight-setting process, 
the relative weights of these particular MS-DRGs would become 
artificially inflated, potentially skewing the relative weights. In 
addition, we want to protect the integrity of the budget neutrality 
process by ensuring that, in estimating payments, no increase to the 
standardized amount occurs as a result of lower overall payments in a 
previous year that stem from using weights and case-mix that are based 
on lower severity MS-DRG assignments. If this would occur, the 
anticipated cost savings from the HAC policy would be lost.
    To avoid these problems, we reset the POA indicator field to ``Y'' 
only for relative weight-setting purposes for all claims that otherwise 
have an ``N'' or a ``U'' in the POA field. This resetting ``forced'' 
the more costly HAC claims into the higher severity MS-DRGs as 
appropriate, and the relative weights calculated for each MS-DRG more 
closely reflect the true costs of those cases.
    In addition, in the FY 2013 IPPS/LTCH PPS final rule, for FY 2013 
and subsequent fiscal years, we finalized a policy to treat hospitals 
that participate in the Bundled Payments for Care Improvement (BPCI) 
initiative the same as prior fiscal years for the IPPS payment modeling 
and ratesetting process without regard to hospitals' participation 
within these bundled payment models (that is, as if hospitals were not 
participating in those models under the BPCI initiative). The BPCI 
initiative, developed under the authority of section 3021 of the 
Affordable Care Act (codified at section 1115A of the Act), is 
comprised of four broadly defined models of care, which link payments 
for multiple services beneficiaries receive during an episode of care. 
Under the BPCI initiative, organizations enter into payment 
arrangements that include financial and performance accountability for 
episodes of care. For FY 2016, we are proposing to continue to include 
all applicable data from subsection (d) hospitals participating in BPCI 
Models 1, 2, and 4 in our IPPS payment modeling and ratesetting 
calculations. We refer readers to the FY 2013 IPPS/LTCH PPS final rule 
for a complete discussion on our final policy for the treatment of 
hospitals participating in the BPCI initiative in our ratesetting 
process. For additional information on the BPCI initiative, we refer 
readers to the CMS' Center for Medicare and Medicaid Innovation's Web 
site at: http://innovation.cms.gov/initiatives/Bundled-Payments/index.html and to section IV.H.4. of the preamble of the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53341 through 53343).
    Once the MedPAR data were trimmed and the statistical outliers were 
removed, the charges for each of the 19 cost groups for each claim were 
standardized to remove the effects of differences in area wage levels, 
IME and DSH payments, and for hospitals located in Alaska and Hawaii, 
the applicable cost-of-living adjustment. Because hospital charges 
include charges for both operating and capital costs, we standardized 
total charges to remove the effects of differences in geographic 
adjustment factors, cost-of-living adjustments, and DSH payments under 
the capital IPPS as well. Charges were then summed by MS-DRG for each 
of the 19 cost groups so that each MS-DRG had 19 standardized charge 
totals. These charges were then adjusted to cost by applying the 
national average CCRs developed from the FY 2013 cost report data.
    The 19 cost centers that we used in the proposed relative weight 
calculation are shown in the following table. The table shows the lines 
on the cost report and the corresponding revenue codes that we used to 
create the 19 national cost center CCRs.

[[Page 24412]]



--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Cost from HCRIS       Charges from HCRIS
                                                   Revenue codes                     (Worksheet C, Part 1,  (Worksheet C, Part 1,  Medicare charges from
  Cost center group name (19     MedPAR charge     contained in    Cost report line     Column 5 and line      Column 6 & 7 and    HCRIS (Worksheet D-3,
            total)                   field         MedPAR charge      description    number) Form CMS-2552-   line  number) Form   Column & line number)
                                                       field                                   10                CMS-2552-10          Form CMS-2552-10
--------------------------------------------------------------------------------------------------------------------------------------------------------
Routine Days.................  Private Room      011X and 014X...  Adults &          C_1_C5_30............  C_1_C6_30............  D3_HOS_C2_30
                                Charges.                            Pediatrics
                                                                    (General
                                                                    Routine Care).
                               Semi-Private      012X, 013X and    ................  .....................  .....................  .....................
                                Room Charges.     016X-019X.
                               Ward Charges....  015X............  ................  .....................  .....................  .....................
Intensive Days...............  Intensive Care    020X............  Intensive Care    C_1_C5_31............  C_1_C6_31............  D3_HOS_C2_31
                                Charges.                            Unit.
                               Coronary Care     021X............  Coronary Care     C_1_C5_32............  C_1_C6_32............  D3_HOS_C2_32
                                Charges.                            Unit.
                                                                   Burn Intensive    C_1_C5_33............  C_1_C6_33............  D3_HOS_C2_33
                                                                    Care Unit.
                                                                   Surgical          C_1_C5_34............  C_1_C6_34............  D3_HOS_C2_34
                                                                    Intensive Care
                                                                    Unit.
                                                                   Other Special     C_1_C5_35............  C_1_C6_35............  D3_HOS_C2_35
                                                                    Care Unit.
Drugs........................  Pharmacy Charges  025X, 026X and    Intravenous       C_1_C5_64............  C_1_C6_64............  D3_HOS_C2_64
                                                  063X.             Therapy.                                C_1_C7_64............
                                                                   Drugs Charged To  C_1_C5_73............  C_1_C6_73............  D3_HOS_C2_73
                                                                    Patient.                                C_1_C7_73............
Supplies and Equipment.......  Medical/Surgical  0270, 0271,       Medical Supplies  C_1_C5_71............  C_1_C6_71............  D3_HOS_C2_71
                                Supply Charges.   0272, 0273,       Charged to                              C_1_C7_71............
                                                  0274, 0277,       Patients.
                                                  0279, and 0621,
                                                  0622, 0623.
                               Durable Medical   0290, 0291, 0292  DME-Rented......  C_1_C5_96............  C_1_C6_96............  D3_HOS_C2_96
                                Equipment         and 0294-0299.                                            C_1_C7_96............
                                Charges.
                               Used Durable      0293............  DME-Sold........  C_1_C5_97............  C_1_C6_97............  D3_HOS_C2_97
                                Medical Charges.                                                            C_1_C7_97............
Implantable Devices..........                    0275, 0276,       Implantable       C_1_C5_72............  C_1_C6_72............  D3_HOS_C2_72
                                                  0278, 0624.       Devices Charged                         C_1_C7_72............
                                                                    to Patients.
Therapy Services.............  Physical Therapy  042X............  Physical Therapy  C_1_C5_66............  C_1_C6_66............  D3_HOS_C2_66
                                Charges.                                                                    C_1_C7_66............
                               Occupational      043X............  Occupational      C_1_C5_67............  C_1_C6_67............  D3_HOS_C2_67
                                Therapy Charges.                    Therapy.                                C_1_C7_67............
                               Speech Pathology  044X and 047X...  Speech Pathology  C_1_C5_68............  C_1_C6_68............  D3_HOS_C2_68
                                Charges.                                                                    C_1_C7_68............
Inhalation Therapy...........  Inhalation        041X and 046X...  Respiratory       C_1_C5_65............  C_1_C6_65............  D3_HOS_C2_65
                                Therapy Charges.                    Therapy.                                C_1_C7_65............
Operating Room...............  Operating Room    036X............  Operating Room..  C_1_C5_50............  C_1_C6_50............  D3_HOS_C2_50
                                Charges.                                                                    C_1_C7_50............
                                                 071X............  Recovery Room...  C_1_C5_51............  C_1_C6_51............  D3_HOS_C2_51
                                                                                                            C_1_C7_51              .....................
Labor & Delivery.............  Operating Room    072X............  Delivery Room     C_1_C5_52............  C_1_C6_52............  D3_HOS_C2_52
                                Charges.                            and Labor Room.                         C_1_C7_52............
Anesthesia...................  Anesthesia        037X............  Anesthesiology..  C_1_C5_53............  C_1_C6_53............  D3_HOS_C2_53
                                Charges.
                                                                                                            C_1_C7_53              .....................
Cardiology...................  Cardiology        048X and 073X...  Electro-          C_1_C5_69............  C_1_C6_69............  D3_HOS_C2_69
                                Charges.                            cardiology.
                                                                                                            C_1_C7_69              .....................
Cardiac Catheterization......                    0481............  Cardiac           C_1_C5_59............  C_1_C6_59............  D3_HOS_C2_59
                                                                    Catheterization.                        C_1_C7_59............
Laboratory...................  Laboratory        030X, 031X, and   Laboratory......  C_1_C5_60............  C_1_C6_60............  D3_HOS_C2_60
                                Charges.          075X.                                                     C_1_C7_60............
                                                                   PBP Clinic        C_1_C5_61............  C_1_C6_61............  D3_HOS_C2_61
                                                                    Laboratory                              C_1_C7_61............
                                                                    Services.
                                                 074X, 086X......  Electro-          C_1_C5_70............  C_1_C6_70............  D3_HOS_C2_70
                                                                    Encephalography.                        C_1_C7_70............
Radiology....................  Radiology         032X, 040X......  Radiology--Diagn  C_1_C5_54............  C_1_C6_54............  D3_HOS_C2_54
                                Charges.                            ostic.                                  C_1_C7_54............
                                                 028X, 0331,       Radiology--Thera  C_1_C5_55............  C_1_C6_55............  D3_HOS_C2_55
                                                  0332, 0333,       peutic.
                                                  0335, 0339,
                                                  0342.
                                                 0343 and 344....  Radioisotope....  C_1_C5_56............  C_1_C6_56............  D3_HOS_C2_56
                                                                                                            C_1_C7_56............
Computed Tomography (CT) Scan  CT Scan Charges.  035X............  Computed          C_1_C5_57............  C_1_C6_57............  D3_HOS_C2_57
                                                                    Tomography (CT)                         C_1_C7_57............
                                                                    Scan.

[[Page 24413]]

 
Magnetic Resonance Imaging     MRI Charges.....  061X............  Magnetic          C_1_C5_58............  C_1_C6_58............  D3_HOS_C2_58
 (MRI).                                                             Resonance                               C_1_C7_58............
                                                                    Imaging (MRI).
Emergency Room...............  Emergency Room    045X............  Emergency.......  C_1_C5_91............  C_1_C6_91............  D3_HOS_C2_91
                                Charges.                                                                    C_1_C7_91............
Blood and Blood Products.....  Blood Charges...  038X............  Whole Blood &     C_1_C5_62............  C_1_C6_62............  D3_HOS_C2_62
                                                                    Packed Red                              C_1_C7_62............
                                                                    Blood Cells.
                               Blood Storage/    039X............  Blood Storing,    C_1_C5_63............  C_1_C6_63............  D3_HOS_C2_63
                                Processing.                         Processing, &                           C_1_C7_63............
                                                                    Transfusing.
Other Services...............  Other Service     0002-0099, 022X,  ................  .....................  .....................  .....................
                                Charge.           023X,
                                                  024X,052X,053X.
                                                 055X-060X, 064X-  ................  .....................  .....................  .....................
                                                  070X, 076X-
                                                  078X, 090X-095X
                                                  and 099X.
                               Renal Dialysis..  0800X...........  Renal Dialysis..  C_1_C5_74............  C_1_C6_74............  D3_HOS_C2_74
                               ESRD Revenue      080X and 082X-    ................  .....................  C_1_C7_74              .....................
                                Setting Charges.  088X.
                                                                   Home Program      C_1_C5_94............  C_1_C6_94............  D3_HOS_C2_94
                                                                    Dialysis.                               C_1_C7_94............
                               Outpatient        049X............  ASC (Non          C_1_C5_75............  C_1_C6_75............  D3_HOS_C2_75
                                Service Charges.                    Distinct Part).
                               Lithotripsy       079X............  ................  .....................  C_1_C7_75              .....................
                                Charge.
                                                                   Other Ancillary.  C_1_C5_76............  C_1_C6_76............  D3_HOS_C2_76
                                                                                                            C_1_C7_76............
                               Clinic Visit      051X............  Clinic..........  C_1_C5_90............  C_1_C6_90............  D3_HOS_C2_90
                                Charges.                                                                    C_1_C7_90............
                                                                   Observation beds  C_1_C5_92.01.........  C_1_C6_92.01.........  D3_HOS_C2_92.01
                                                                                                            C_1_C7_92.01.........
                               Professional      096X, 097X, and   Other Outpatient  C_1_C5_93............  C_1_C6_93............  D3_HOS_C2_93
                                Fees Charges.     098X.             Services.                               C_1_C7_93............
                               Ambulance         054X............  Ambulance.......  C_1_C5_95............  C_1_C6_95............  D3_HOS_C2_95
                                Charges.                                                                    C_1_C7_95............
                                                                   Rural Health      C_1_C5_88............  C_1_C6_88............  D3_HOS_C2_88
                                                                    Clinic.                                 C_1_C7_88............
                                                                   FQHC............  C_1_C5_89............  C_1_C6_89............  D3_HOS_C2_89
                                                                                                            C_1_C7_89............
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We refer readers to the FY 2009 IPPS/LTCH PPS final rule (73 FR 
48462) for a discussion on the revenue codes included in the Supplies 
and Equipment and Implantable Devices CCRs, respectively.
3. Development of National Average CCRs
    We developed the national average CCRs as follows:
    Using the FY 2013 cost report data, we removed CAHs, Indian Health 
Service hospitals, all-inclusive rate hospitals, and cost reports that 
represented time periods of less than 1 year (365 days). We included 
hospitals located in Maryland because we include their charges in our 
claims database. We then created CCRs for each provider for each cost 
center (see prior table for line items used in the calculations) and 
removed any CCRs that were greater than 10 or less than 0.01. We 
normalized the departmental CCRs by dividing the CCR for each 
department by the total CCR for the hospital for the purpose of 
trimming the data. We then took the logs of the normalized cost center 
CCRs and removed any cost center CCRs where the log of the cost center 
CCR was greater or less than the mean log plus/minus 3 times the 
standard deviation for the log of that cost center CCR. Once the cost 
report data were trimmed, we calculated a Medicare-specific CCR. The 
Medicare-specific CCR was determined by taking the Medicare charges for 
each line item from Worksheet D-3 and deriving the Medicare-specific 
costs by applying the hospital-specific departmental CCRs to the 
Medicare-specific charges for each line item from Worksheet D-3. Once 
each hospital's Medicare-specific costs were established, we summed the 
total Medicare-specific costs and divided by the sum of the total 
Medicare-specific charges to produce national average, charge-weighted 
CCRs.
    After we multiplied the total charges for each MS-DRG in each of 
the 19 cost centers by the corresponding national average CCR, we 
summed the 19 ``costs'' across each MS-DRG to produce a total 
standardized cost for the MS-DRG. The average standardized cost for 
each MS-DRG was then computed as the total standardized cost for the 
MS-DRG divided by the transfer-adjusted case count for the MS-DRG. The 
average cost for each MS-DRG was then divided by the national average 
standardized cost

[[Page 24414]]

per case to determine the relative weight.
    The proposed FY 2016 cost-based relative weights were then 
normalized by an adjustment factor of 1.678672 so that the average case 
weight after recalibration was equal to the average case weight before 
recalibration. The normalization adjustment is intended to ensure that 
recalibration by itself neither increases nor decreases total payments 
under the IPPS, as required by section 1886(d)(4)(C)(iii) of the Act.
    The proposed 19 national average CCRs for FY 2016 are as follows:

------------------------------------------------------------------------
                             Group                                 CCR
------------------------------------------------------------------------
Routine Days...................................................    0.485
Intensive Days.................................................    0.399
Drugs..........................................................    0.192
Supplies & Equipment...........................................    0.299
Implantable Devices............................................    0.344
Therapy Services...............................................    0.335
Laboratory.....................................................    0.125
Operating Room.................................................    0.201
Cardiology.....................................................    0.119
Cardiac Catheterization........................................    0.125
Radiology......................................................    0.159
MRIs...........................................................    0.085
CT Scans.......................................................    0.041
Emergency Room.................................................    0.184
Blood and Blood Products.......................................    0.340
Other Services.................................................    0.367
Labor & Delivery...............................................    0.404
Inhalation Therapy.............................................    0.178
Anesthesia.....................................................    0.108
------------------------------------------------------------------------

    Since FY 2009, the relative weights have been based on 100 percent 
cost weights based on our MS-DRG grouping system.
    When we recalibrated the DRG weights for previous years, we set a 
threshold of 10 cases as the minimum number of cases required to 
compute a reasonable weight. For FY 2016, we are proposing to use that 
same case threshold in recalibrating the MS-DRG relative weights for FY 
2016. Using data from the FY 2014 MedPAR file, there were 8 MS-DRGs 
that contain fewer than 10 cases. Under the MS-DRGs, we have fewer low-
volume DRGs than under the CMS DRGs because we no longer have separate 
DRGs for patients aged 0 to 17 years. With the exception of newborns, 
we previously separated some DRGs based on whether the patient was age 
0 to 17 years or age 17 years and older. Other than the age split, 
cases grouping to these DRGs are identical. The DRGs for patients aged 
0 to 17 years generally have very low volumes because children are 
typically ineligible for Medicare. In the past, we have found that the 
low volume of cases for the pediatric DRGs could lead to significant 
year-to-year instability in their relative weights. Although we have 
always encouraged non-Medicare payers to develop weights applicable to 
their own patient populations, we have received frequent complaints 
from providers about the use of the Medicare relative weights in the 
pediatric population. We believe that eliminating this age split in the 
MS-DRGs will provide more stable payment for pediatric cases by 
determining their payment using adult cases that are much higher in 
total volume. Newborns are unique and require separate MS-DRGs that are 
not mirrored in the adult population. Therefore, it remains necessary 
to retain separate MS-DRGs for newborns. All of the low-volume MS-DRGs 
listed below are for newborns. For FY 2016, because we do not have 
sufficient MedPAR data to set accurate and stable cost relative weights 
for these low-volume MS-DRGs, we are proposing to compute relative 
weights for the low-volume MS-DRGs by adjusting their final FY 2015 
relative weights by the percentage change in the average weight of the 
cases in other MS-DRGs. The crosswalk table is shown below:

------------------------------------------------------------------------
  Low-volume  MS-DRG         MS-DRG Title         Crosswalk to MS-DRG
------------------------------------------------------------------------
768...................  Vaginal Delivery with  Final FY 2015 relative
                         O.R. Procedure         weight (adjusted by
                         Except Sterilization   percent change in
                         and/or D&C.            average weight of the
                                                cases in other
                                                MS[dash]DRGs).
789...................  Neonates, Died or      Final FY 2015 relative
                         Transferred to         weight (adjusted by
                         Another Acute Care     percent change in
                         Facility.              average weight of the
                                                cases in other
                                                MS[dash]DRGs).
790...................  Extreme Immaturity or  Final FY 2015 relative
                         Respiratory Distress   weight (adjusted by
                         Syndrome, Neonate.     percent change in
                                                average weight of the
                                                cases in other
                                                MS[dash]DRGs).
791...................  Prematurity with       Final FY 2015 relative
                         Major Problems.        weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other
                                                MS[dash]DRGs).
792...................  Prematurity without    Final FY 2015 relative
                         Major Problems.        weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other
                                                MS[dash]DRGs).
793...................  Full-Term Neonate      Final FY 2015 relative
                         with Major Problems.   weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other
                                                MS[dash]DRGs).
794...................  Neonate with Other     Final FY 2015 relative
                         Significant Problems.  weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other MS DRGs).
795...................  Normal Newborn.......  Final FY 2015 relative
                                                weight (adjusted by
                                                percent change in
                                                average weight of the
                                                cases in other
                                                MS[dash]DRGs).
------------------------------------------------------------------------

    We are inviting public comments on this proposal.
4. Solicitation of Public Comments on Expanding the Bundled Payments 
for Care Improvement (BPCI) Initiative
a. Background
    Since 2011, CMS has been working to develop and test models of 
bundling Medicare payments under the authority of section 1115A of the 
Act. Through these models, CMS plans to evaluate whether bundled 
payments result in higher quality and more coordinated care at a lower 
cost to Medicare. CMS is currently testing the Bundled Payments for 
Care Improvement (BPCI) initiative. Under this initiative, 
organizations enter into payment arrangements that include financial 
and performance accountability for episodes of care.
    The BPCI initiative is comprised of four related payment models, 
which link payments for multiple services that Medicare beneficiaries 
receive during an episode of care into a bundled payment. Episodes of 
care under the BPCI initiative begin with either (1) an inpatient 
hospital stay or (2) postacute care services following a qualifying 
inpatient hospital stay. More information on the four models under the 
BPCI initiative can be found on the CMS Center for Medicare and 
Medicaid Innovation's Web site at: http://innovation.cms.gov/initiatives/bundled-payments/. We also have included discussions of the 
BPCI initiative in the annual IPPS/LTCH PPS rulemakings since FY 2013 
(77 FR 53341 through 53343).
    All four models in the BPCI initiative pay a discounted bundled 
payment for

[[Page 24415]]

a single episode of care as an alternative approach to payment for 
service delivery under traditional Medicare fee-for-service (FFS). 
Model 1 participants are paid a discounted bundled payment in lieu of 
the standard IPPS payment upon submission of claims. In Models 2 and 3, 
the bundled payment is paid retrospectively through a reconciliation 
process; participants continue to submit claims and receive payment via 
the usual Medicare FFS payment systems. In Model 4, the bundled payment 
is made prospectively to a hospital, and participating physician and 
nonphysician practitioners submit ``no-pay'' claims to CMS. In all 
models, participants in the BPCI initiative are permitted to share 
gains arising from the providers' care redesign efforts under certain 
circumstances in which such arrangements would not otherwise be 
permitted under Medicare.
    Each of the four models in the BPCI initiative tests bundled 
payments for a different episode of care:
     Model 1 tests retrospective bundled payments for the acute 
care hospital stay only. All participants in this model are acute care 
hospitals, and the episode of care is defined as the inpatient stay in 
the acute care hospital. The hospital is paid a discounted amount based 
on the payment rates established under the IPPS used in the original 
Medicare program. Physicians are paid separately for their services 
under the Medicare Physician Fee Schedule (MPFS).
    While Model 1 makes payments as described above for all MS-DRGs, 
Models 2, 3, and 4 of the BPCI initiative test 48 episodes (comprised 
of groupings of related MS-DRGs). These episodes and the groupings of 
related MS-DRGs that are included in these episodes are listed in the 
table below.
     In Model 2, the episode of care includes the inpatient 
stay in an acute care hospital and all related services during the 
episode, including postacute care services. The episode ends either 30, 
60, or 90 days after a hospital discharge.
     Model 3 focuses on postacute care services. In this model, 
the episode of care is triggered by an acute care hospital stay for an 
MS-DRG included in the episode and begins at the initiation of 
postacute care services in a skilled nursing facility (SNF), inpatient 
rehabilitation facility (IRF), long-term care hospital (LTCH), or home 
health agency (HHA). The episode includes postacute care services, 
physicians' services, and related services provided during an inpatient 
hospital readmission, but does not include services provided during the 
episode-initiating acute care hospital stay. The postacute care 
services included in the episode must begin within 30 days of discharge 
from the inpatient hospital stay and may end either 30, 60, or 90 days 
after the initiation of the episode.
     Model 4 tests prospective single bundled payments for 
physicians' services and hospital services furnished during an acute 
care hospitalization and related readmissions. Under this model, a 
single, prospectively determined bundled payment is made to the 
participating hospital that encompasses all services furnished during 
the inpatient stay by the hospital, physicians, and other 
practitioners. Payments for services furnished in related readmissions 
for 30 days after the hospital discharge are included in the bundled 
payment amount.
    Model 1 of the BPCI initiative began in April 2013. CMS has allowed 
for participation in two phases in Models 2, 3, and 4. The first phase 
is the preparatory phase. In the preparatory phase, participants in the 
BPCI initiative are provided claims data so that they may analyze 
patterns of care for episodes in preparation for improving care 
coordination and quality under bundled payments prior to participation 
in the second phase, the risk-bearing phase.
    In the BPCI initiative, the term ``risk-bearing'' refers to the 
requirement that certain participants in the BPCI initiative bear 
financial risk for spending above the target price set by Medicare 
across the episodes of care in which they participate. By using this 
term, we do not connote any relationship to insurance; we narrowly 
define this term and use it only to highlight the following financial 
responsibilities: In the risk-bearing phase, awardees and awardee 
conveners in Models 2 and 3 are financially responsible to Medicare if 
FFS expenditures are higher than a target price established by Medicare 
for the episode(s) in which they are participating. Awardees assume 
risk on behalf of themselves; awardee conveners assume risk on behalf 
of others and, in some cases, themselves (as described below). Medicare 
will recoup the difference between the target price and the actual FFS 
expenditures from awardees and awardee conveners for all services 
included in the episode of care if the target price is exceeded. 
Medicare will pay awardees and awardee conveners the difference if 
actual FFS expenditures are below the target price. Awardees and 
awardee conveners in Model 4 who have assumed risk on behalf of 
themselves and/or others bear risk in that they assume financial 
responsibility if the bundled prospective payment from Medicare does 
not cover the services included in the episode of care. Awardees and 
all participants under awardee conveners in Models 2, 3, and 4 must 
move to the risk-bearing phase by July 1, 2015.
    There are several entity types currently participating in the two 
phases included in the BPCI initiative's Models 2, 3, and 4. Episode 
initiators, defined as the entities that initiate episodes of care in 
Models 2, 3, and 4, are provided claims data in the preparatory phase 
so that they may establish a structure for bundled payments prior to 
participation in the risk-bearing phase of the initiative. The entities 
that initiate episodes of care vary by model: In Model 4, episode 
initiators are acute care hospitals only; in Model 2, episode 
initiators are acute care hospitals and physician group practices; and 
in Model 3, episode initiators are SNFs, HHAs, LTCHs, IRFs, and 
physician group practices.
    To move into the risk-bearing phase, participants must be selected 
by CMS following a comprehensive review and enter into an agreement 
with CMS. In the risk-bearing phase, episode initiators participate 
through one of two options. The first option is that the episode 
initiator may be an awardee and sign an agreement directly with CMS 
containing a risk-bearing financial arrangement. While not required, 
risk-bearing episode initiators may be associated with a ``facilitator 
convener,'' an entity that convenes multiple health care providers and 
supports the episode initiators in implementing the BPCI initiative but 
does not itself bear any risk. Alternatively, through the second 
option, the episode initiator may participate in the BPCI initiative 
under an awardee convener, which is an organization that may or may not 
be a Medicare provider that assumes financial risk on behalf of the 
episode initiator. In the second option, the awardee convener signs an 
agreement with CMS containing the terms of participation in the model, 
including a risk-bearing financial arrangement. Participation through 
an awardee convener allows episode initiators to mitigate their 
financial risk, and participation through an awardee or facilitator 
convener allows episode initiators to benefit in many cases from the 
convener's resources, such as enhanced technology and administrative 
assistance.
    As of April 2015, the participation in the risk-bearing phase of 
the BPCI initiative is as follows: Model 2 is testing 2,053 episodes 
among 345 episode initiators located in 45 States;

[[Page 24416]]

Model 3 is testing 3,407 episodes among 318 episode initiators located 
in 29 States. Model 4 is testing 16 episodes among 9 episode initiators 
located in 7 States. There are 49 facilitator conveners and awardee 
conveners across the four models. In addition to the entities in the 
risk-bearing phase, several thousand entities in the preparatory phase 
are still considering whether to enter the performance phase, upon 
successful completion of screening and review by CMS.
    The episodes of care and the associated MS-DRGs that define the 
episodes that are being tested in Models 2, 3, and 4 of the BPCI 
initiative are listed in the table below. This table is based on FY 
2015 IPPS MS-DRGs and does not account yet for proposed FY 2016 changes 
to the MS-DRGs.

  Episodes of Care and MS-DRG Groupings Under the Bundled Payments for
           Care Improvement Initiative for Models 2, 3, and 4
------------------------------------------------------------------------
              Episode of care                          MS-DRGs
------------------------------------------------------------------------
Acute myocardial infarction................  280, 281, 282.
AICD generator or lead.....................  245, 265.
Amputation.................................  239, 240, 241, 255, 256,
                                              257, 474, 475, 476, 616,
                                              617, 618.
Atherosclerosis............................  302, 303.
Back and neck except spinal fusion.........  518, 519, 520.
Coronary artery bypass graft...............  231, 232, 233, 234, 235,
                                              236.
Cardiac arrhythmia.........................  308, 309, 310.
Cardiac defibrillator......................  222, 223, 224, 225, 226,
                                              227.
Cardiac valve..............................  216, 217, 218, 219, 220,
                                              221, 266, 267.
Cellulitis.................................  602, 603.
Cervical spinal fusion.....................  471, 472, 473.
Chest pain.................................  313.
Combined anterior posterior spinal fusion..  453, 454, 455.
Complex noncervical spinal fusion..........  456, 457, 458
Congestive heart failure...................  291, 292, 293.
Chronic obstructive pulmonary disease,       190, 191, 192, 202, 203.
 bronchitis, asthma.
Diabetes...................................  637, 638, 639.
Double joint replacement of the lower        461, 462.
 extremity.
Esophagitis, gastroenteritis, and other      391, 392.
 digestive disorders.
Fractures of the femur and hip or pelvis...  533, 534, 535, 536.
Gastrointestinal hemorrhage................  377, 378, 379.
Gastrointestinal obstruction...............  388, 389, 390.
Hip and femur procedures except major joint  480, 481, 482.
Lower extremity and humerus procedure        492, 493, 494.
 except hip, foot, femur.
Major bowel procedures.....................  329, 330, 331.
Major cardiovascular procedure.............  237, 238.
Major joint replacement of the lower         469, 470.
 extremity.
Major joint replacement of the upper         483.
 extremity.
Medical noninfectious orthopedic...........  537, 538, 551, 552, 553,
                                              554, 555, 556, 557, 558,
                                              559, 560, 561, 562, 563.
Medical peripheral vascular disorders......  299, 300, 301.
Nutritional and metabolic disorders........  640, 641.
Other knee procedures......................  485, 486, 487, 488, 489.
Other respiratory..........................  189, 204, 205, 206, 207,
                                              208, 186, 187, 188.
Other vascular surgery.....................  252, 253, 254.
Pacemaker..................................  242, 243, 244.
Pacemaker device replacement or revision...  258, 259, 260, 261, 262.
Percutaneous coronary intervention.........  246, 247, 248, 249, 250,
                                              251.
Red blood cell disorders...................  811, 812.
Removal of orthopedic devices..............  495, 496, 497, 498, 499.
Renal failure..............................  682, 683, 684.
Revision of the hip or knee................  466, 467, 468.
Sepsis.....................................  870, 871, 872.
Simple pneumonia and respiratory infections  177, 178, 179, 193, 194,
                                              195.
Spinal fusion (noncervical)................  459, 460.
Stroke.....................................  61, 62, 63, 64, 65, 66.
Syncope and collapse.......................  312.
Transient ischemia.........................  69.
Urinary tract infection....................  689, 690.
------------------------------------------------------------------------

b. Considerations for Potential Model Expansion
    In this FY 2016 IPPS/LTCH PPS proposed rule, we are soliciting 
public comments regarding policy and operational issues related to a 
potential expansion of the BPCI initiative in the future. Section 
1115A(c) of the Act, as added by section 3021 of the Affordable Care 
Act, provides the Secretary with the authority to expand through 
rulemaking the duration and scope of a model that is being tested under 
section 1115A(b) of the Act, such as the BPCI initiative (including 
implementation on a nationwide basis), if the following findings are 
made, taking into account the evaluation of the model under section 
1115A(b)(4) of the Act: (1) The Secretary determines that the expansion 
is expected to either reduce Medicare

[[Page 24417]]

spending without reducing the quality of care or improve the quality of 
patient care without increasing spending; (2) the CMS Chief Actuary 
certifies that the expansion would reduce (or would not result in any 
increase in) net Medicare program spending; and (3) the Secretary 
determines that the expansion would not deny or limit the coverage or 
provision of Medicare benefits. The decision of whether or not to 
expand will be made by the Secretary in coordination with CMS and the 
Office of the Chief Actuary based on whether findings about the 
initiative meet the statutory criteria for expansion under section 
1115A(c) of the Act.
    Evaluation of the BPCI initiative for expansion is expected to 
include analyses based on a combination of qualitative and quantitative 
sources, including Medicare claims, patient surveys, awardee reports, 
interviews, and site visits. Given that further evaluation of the BPCI 
initiative is needed to determine its impact on both Medicare cost and 
quality of care, at this time, we are not proposing an expansion of any 
models within the initiative or any policy changes associated with it. 
Instead, we are requesting public comments on issues surrounding a 
potential expansion of the BPCI initiative so that we can be prepared 
in the event that the Secretary determines that findings from the 
evaluation of the initiative demonstrate that it meets all criteria for 
expansion, consistent with the requirements of section 1115A(c) of the 
Act, and that, based on these findings and other pertinent factors, 
expansion is warranted.
    CMS is committed to testing new payment and service delivery 
models, evaluating results and advancing best practices, and engaging 
stakeholders. These three priorities are crucial to the BPCI 
initiative. As we initiate discussions about potential expansion, we 
continue to value stakeholder engagement within the framework of CMS' 
priorities for the BPCI initiative. Consistent with its ongoing 
commitment to develop new models and refine existing models based on 
additional information and experience, CMS may modify existing models 
or test additional models under its testing authority under section 
1115A of the Act. It may possibly do so, taking into consideration 
stakeholder input, including feedback received through the public 
comments submitted in response to the discussion in this section. 
However, the primary goal for this solicitation of public comments is 
to receive information about a potential expansion of the BPCI 
initiative. Therefore, we are requesting that public comments on the 
discussion in this section consider how expanded episode payment could 
continue to encourage high-quality, high-value care during Medicare 
beneficiaries' episodes of care, while allowing for accurate payments 
to providers, encouraging coordination of care among providers, and 
ensuring access to care and freedom of choice for all Medicare 
beneficiaries, regardless of their severity of illness. The following 
list is not an exhaustive list of issues on which we are requesting 
public comments, and the inclusion of the list of issues is not, in any 
way, meant to imply that any or all of these issues would be addressed 
in any expanded model. The solicitation of public comments is for 
planning purposes, and as mentioned above, we would use additional 
rulemaking if we decide to expand any of the models.
    We are seeking public comments on the following issues:
     Breadth and scope of an expansion. For example, whether 
model expansion should focus on one or more of the four models or one 
or more specific episodes, or should target specific geographic regions 
of the country. Further, would the model best be expanded with 
voluntary participation or be most effective if participation were 
required within the chosen models, episodes, and regions.
     Episode definitions. We are seeking public comments on the 
current BPCI initiative episode definitions as part of an expansion, 
including the MS-DRGs, other bundled services (such as hospital 
readmissions), exclusions, and the duration of the episodes. The BPCI 
initiative uses broadly defined episodes, and these episodes include 
MS-DRGs that account for approximately 80 percent of Medicare hospital 
discharges. Depending on the model, lengths of episodes may be 30, 60, 
or 90 days. Under all models within the BPCI initiative, these episode 
definitions have been standardized across models for episodes that 
relate to an acute care hospital stay. An expansion might target 
episodes beginning with inpatient hospital care or postacute care. We 
are seeking public comments regarding whether episode definition 
refinements should be made; for example, refinements potentially could 
be made for episodes that begin with postacute care to incorporate the 
findings from standardized patient assessments at postacute care 
initiation, rather than tying the episode to the hospital discharge 
diagnosis.
     Models for expansion. We are seeking public comments on 
whether we should consider one or more of the current BPCI initiative 
models as the first candidates for expansion. For example, under a 
model expansion, we potentially could expand several or all of the 
models that include postacute care on a similar timeframe or one model 
at a time.
     Roles of organizations and relationships necessary or 
beneficial to care transformation. We are seeking public comments on 
the roles that organizations, including health care providers and 
suppliers and other entities, should serve under an expanded model. 
Within this category, we are seeking public comments specifically on 
the types of relationships and arrangements, financial or otherwise, 
that would assist participants with care transformation in an expanded 
model. We would appreciate any public comments on whether relationships 
encouraged under an expansion could have unintended consequences and 
what those consequences might be.
     Setting bundled payment amounts. We are seeking public 
comments on approaches to setting bundled payments under model 
expansion. For participants in the BPCI initiative, bundled payments 
are related to the historical episode experience of episode initiators 
based on data from 2009 through 2012. In the BPCI initiative, only 
Model 4 rates are set prospectively, while Models 2 and 3 involve 
trending of target amounts following the conclusion of episodes. We 
potentially could base payments on regional episode experience or set 
all payments prospectively under model expansion. We potentially could 
apply the same episode discount percentages to all episodes or vary 
these discount percentages based on care redesign opportunity in the 
specific episode. We potentially could rebase payments annually or on 
another timeframe. In the case of setting payment amounts via a 
specified discount percentage, we are seeking public comments on 
methodologies that could be used to determine the discount percentages. 
We also are seeking public comments on any other methodologies that 
could be considered for the purposes of setting bundled payment 
amounts.
     Mitigating risk of high-cost cases. Depending on the 
breadth and scope of an expansion, the potential financial impact of 
high-cost episode cases could be an issue for some providers. 
Currently, under the BPCI initiative, we apply a variety of approaches 
to risk mitigation, including allowing participants to select risk 
corridors that limit the inclusion of high-cost cases in episodes. We 
are seeking public comments on strategies to mitigate the

[[Page 24418]]

risk of high-cost cases to ensure appropriate payment for these 
episodes under model expansion, such as through outlier or other 
policies, while encouraging high-value, coordinated care for these 
cases as well. For example, under model expansion, we potentially could 
establish an outlier pool with specific payment policies, similar to 
approaches under the IPPS and the OPPS.
     Administering bundled payments. We are seeking public 
comments on the issues related to prospective or retrospective payment 
under model expansion. Currently, Model 4 under the BPCI initiative 
makes a single bundled payment, while Models 2 and 3 utilize routine 
Medicare FFS payments to all providers and supplies with retrospective 
reconciliation for the awardee. We are interested in public comments on 
the feasibility of different payment approaches under the various 
models, including the administrative capacity and feasibility for some 
organizations to pay others for care during episodes or to share 
payments at reconciliation. For example, under model expansion, we 
potentially could make a single bundled payment in all models, but we 
would need to identify the entity to receive the payments and engage in 
widespread changes to the shared systems to accommodate all payment 
systems. Under the BPCI initiative, we have agreements with multiple 
types of entities, including awardee conveners, that may not be 
Medicare providers or suppliers. We are requesting comments on the 
possibility of paying an awardee convener the bundled payment when that 
entity did not actually deliver health care services to the 
beneficiaries in episodes in an expanded model. Specifically, we would 
like to know what operational and policy considerations would need to 
be addressed. A retrospective reconciliation would have different 
concerns than a prospective payment.
     Data needs. We are seeking public comments on the types of 
data and functionality needed in the marketplace in order to expand 
this type of model (for example, EHRs and quality measurement, among 
others). We currently provide monthly episode claims data to BPCI 
initiative participants for purposes of health care operations and 
periodic monitoring reports. Under model expansion, providers that are 
not fully integrated may need to develop approaches to sharing 
information regarding patients initiating and participating in 
episodes. Real-time information may improve the coordination of care.
     Use of health information technology. We are seeking 
public comments on how the use of health information technology can be 
used and encouraged in coordinating care across care settings, 
including postacute care. Health information technology and health 
information exchange may be used to support these models by sharing 
summaries of care, problem lists, physician orders, prescription lists, 
and care plans across the care continuum. We welcome public comments on 
how to include SNFs, LTCHs, IRFs, and HHAs that do not currently 
utilize health information technology and health information exchange 
at an advanced level without compromising the coordination of care 
among acute care hospitals and postacute care providers.
     Quality measurement and payment for value. We are seeking 
public comments on the quality measures that could be applied to 
episodes and approaches to incorporating value-based payment in the 
BPCI initiative. For example, under model expansion, we potentially 
could apply the same quality measures to all episodes or develop 
episode-specific quality measures. We potentially could incorporate 
value-based payment under model expansion by reducing the discount 
percentage for high quality care or increasing the discount percentage 
for low quality care.
     Transition from Medicare FFS payments to bundled payments. 
We are seeking public comments on the need for and parameters of a 
transition period from Medicare FFS payment to bundled payment under an 
expanded model. We are seeking public comments regarding the length of 
any transition and how such a transition would be made.
     Other issues. We are seeking public comments on any other 
issues the public believes are important for us to consider.
    Consistent with our continuing commitment to engaging stakeholders 
in CMS' work, we are seeking public comments on these issues to broaden 
and deepen our understanding of the important issues and challenges 
regarding bundled payments in the current health care marketplace. 
These public comments also will assist us in planning for expansion if 
a decision is made to expand the BPCI initiative in the future.

I. Proposed Add-On Payments for New Services and Technologies

1. Background
    Sections 1886(d)(5)(K) and (L) of the Act establish a process of 
identifying and ensuring adequate payment for new medical services and 
technologies (sometimes collectively referred to in this section as 
``new technologies'') under the IPPS. Section 1886(d)(5)(K)(vi) of the 
Act specifies that a medical service or technology will be considered 
new if it meets criteria established by the Secretary after notice and 
opportunity for public comment. Section 1886(d)(5)(K)(ii)(I) of the Act 
specifies that a new medical service or technology may be considered 
for new technology add-on payment if, ``based on the estimated costs 
incurred with respect to discharges involving such service or 
technology, the DRG prospective payment rate otherwise applicable to 
such discharges under this subsection is inadequate.'' We note that 
beginning with discharges occurring in FY 2008, CMS transitioned from 
CMS-DRGs to MS-DRGs.
    The regulations at 42 CFR 412.87 implement these provisions and 
specify three criteria for a new medical service or technology to 
receive the additional payment: (1) The medical service or technology 
must be new; (2) the medical service or technology must be costly such 
that the DRG rate otherwise applicable to discharges involving the 
medical service or technology is determined to be inadequate; and (3) 
the service or technology must demonstrate a substantial clinical 
improvement over existing services or technologies. Below we highlight 
some of the major statutory and regulatory provisions relevant to the 
new technology add-on payment criteria as well as other information. 
For a complete discussion on the new technology add-on payment 
criteria, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51572 through 51574).
    Under the first criterion, as reflected in Sec.  412.87(b)(2), a 
specific medical service or technology will be considered ``new'' for 
purposes of new medical service or technology add-on payments until 
such time as Medicare data are available to fully reflect the cost of 
the technology in the MS-DRG weights through recalibration. We note 
that we do not consider a service or technology to be new if it is 
substantially similar to one or more existing technologies. That is, 
even if a technology receives a new FDA approval, it may not 
necessarily be considered ``new'' for purposes of new technology add-on 
payments if it is ``substantially similar'' to a technology that was 
approved by FDA and has been on the market for more than 2 to 3 years. 
In the FY 2006 IPPS final rule (70 FR 47351) and the FY 2010 IPPS/RY 
2010 LTCH PPS final rule (74 FR 43813 and 43814), we explained our 
policy

[[Page 24419]]

regarding substantial similarity in detail.
    Under the second criterion, Sec.  412.87(b)(3) further provides 
that, to be eligible for the add-on payment for new medical services or 
technologies, the MS-DRG prospective payment rate otherwise applicable 
to the discharge involving the new medical services or technologies 
must be assessed for adequacy. Under the cost criterion, to assess the 
adequacy of payment for a new technology paid under the applicable MS-
DRG prospective payment rate, we evaluate whether the charges for cases 
involving the new technology exceed certain threshold amounts. Table 10 
that was released with the FY 2015 IPPS/LTCH PPS final rule contains 
the final thresholds that we use to evaluate applications for new 
technology add-on payments for FY 2016. We refer readers to the CMS Web 
site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY2015-IPPS-Final-Rule-Home-Page-Items/FY2015-Final-Rule-Tables.html to download and view Table 10. We note that later in 
this section under the discussion of the WATCHMAN[supreg] Left Atrial 
Appendage (LAA) Closure technology, we are soliciting public comments 
on the use of supplemental threshold values when the coding to identify 
a new technology is reassigned to a new MS-DRG that does not have a 
threshold value displayed in the most recent version of Table 10.
    In the September 7, 2001 final rule that established the new 
technology add-on payment regulations (66 FR 46917), we discussed the 
issue of whether the Health Insurance Portability and Accountability 
Act (HIPAA) Privacy Rule at 45 CFR parts 160 and 164 applies to claims 
information that providers submit with applications for new technology 
add-on payments. We refer readers to the FY 2012 IPPS/LTCH PPS final 
rule (76 FR 51573) for complete information on this issue.
    Under the third criterion, Sec.  412.87(b)(1) of our existing 
regulations provides that a new technology is an appropriate candidate 
for an additional payment when it represents ``an advance that 
substantially improves, relative to technologies previously available, 
the diagnosis or treatment of Medicare beneficiaries.'' For example, a 
new technology represents a substantial clinical improvement when it 
reduces mortality, decreases the number of hospitalizations or 
physician visits, or reduces recovery time compared to the technologies 
previously available. (We refer readers to the September 7, 2001 final 
rule for a more detailed discussion of this criterion (66 FR 46902).)
    The new medical service or technology add-on payment policy under 
the IPPS provides additional payments for cases with relatively high 
costs involving eligible new medical services or technologies while 
preserving some of the incentives inherent under an average-based 
prospective payment system. The payment mechanism is based on the cost 
to hospitals for the new medical service or technology. Under Sec.  
412.88, if the costs of the discharge (determined by applying cost-to-
charge ratios (CCRs) as described in Sec.  412.84(h)) exceed the full 
DRG payment (including payments for IME and DSH, but excluding outlier 
payments), Medicare will make an add-on payment equal to the lesser of: 
(1) 50 percent of the estimated costs of the new technology (if the 
estimated costs for the case including the new technology exceed 
Medicare's payment); or (2) 50 percent of the difference between the 
full DRG payment and the hospital's estimated cost for the case. Unless 
the discharge qualifies for an outlier payment, the additional Medicare 
payment is limited to the full MS-DRG payment plus 50 percent of the 
estimated costs of the new technology.
    Section 503(d)(2) of Public Law 108-173 provides that there shall 
be no reduction or adjustment in aggregate payments under the IPPS due 
to add-on payments for new medical services and technologies. 
Therefore, in accordance with section 503(d)(2) of Public Law 108-173, 
add-on payments for new medical services or technologies for FY 2005 
and later years have not been subjected to budget neutrality.
    In the FY 2009 IPPS final rule (73 FR 48561 through 48563), we 
modified our regulations at Sec.  412.87 to codify our longstanding 
practice of how CMS evaluates the eligibility criteria for new medical 
service or technology add-on payment applications. That is, we first 
determine whether a medical service or technology meets the newness 
criterion, and only if so, do we then make a determination as to 
whether the technology meets the cost threshold and represents a 
substantial clinical improvement over existing medical services or 
technologies. We also amended Sec.  412.87(c) to specify that all 
applicants for new technology add-on payments must have FDA approval or 
clearance for their new medical service or technology by July 1 of each 
year prior to the beginning of the fiscal year that the application is 
being considered.
    The Council on Technology and Innovation (CTI) at CMS oversees the 
agency's cross-cutting priority on coordinating coverage, coding and 
payment processes for Medicare with respect to new technologies and 
procedures, including new drug therapies, as well as promoting the 
exchange of information on new technologies between CMS and other 
entities. The CTI, composed of senior CMS staff and clinicians, was 
established under section 942(a) of Public Law 108-173. The Council is 
co-chaired by the Director of the Center for Clinical Standards and 
Quality (CCSQ) and the Director of the Center for Medicare (CM), who is 
also designated as the CTI's Executive Coordinator.
    The specific processes for coverage, coding, and payment are 
implemented by CM, CCSQ, and the local claims-payment contractors (in 
the case of local coverage and payment decisions). The CTI supplements, 
rather than replaces, these processes by working to assure that all of 
these activities reflect the agency-wide priority to promote high-
quality, innovative care. At the same time, the CTI also works to 
streamline, accelerate, and improve coordination of these processes to 
ensure that they remain up to date as new issues arise. To achieve its 
goals, the CTI works to streamline and create a more transparent coding 
and payment process, improve the quality of medical decisions, and 
speed patient access to effective new treatments. It is also dedicated 
to supporting better decisions by patients and doctors in using 
Medicare-covered services through the promotion of better evidence 
development, which is critical for improving the quality of care for 
Medicare beneficiaries.
    To improve the understanding of CMS' processes for coverage, 
coding, and payment and how to access them, the CTI has developed an 
``Innovator's Guide'' to these processes. The intent is to consolidate 
this information, much of which is already available in a variety of 
CMS documents and in various places on the CMS Web site, in a user-
friendly format. This guide was published in 2010 and is available on 
the CMS Web site at: http://www.cms.gov/CouncilonTechInnov/Downloads/InnovatorsGuide5_10_10.pdf.
    As we indicated in the FY 2009 IPPS final rule (73 FR 48554), we 
invite any product developers or manufacturers of new medical 
technologies to contact the agency early in the process of product 
development if they have questions or concerns about the evidence that 
would be needed later in the development process for the agency's 
coverage decisions for Medicare.

[[Page 24420]]

    The CTI aims to provide useful information on its activities and 
initiatives to stakeholders, including Medicare beneficiaries, 
advocates, medical product manufacturers, providers, and health policy 
experts. Stakeholders with further questions about Medicare's coverage, 
coding, and payment processes, or who want further guidance about how 
they can navigate these processes, can contact the CTI at 
[email protected].
    We note that applicants for add-on payments for new medical 
services or technologies for FY 2017 must submit a formal request, 
including a full description of the clinical applications of the 
medical service or technology and the results of any clinical 
evaluations demonstrating that the new medical service or technology 
represents a substantial clinical improvement, along with a significant 
sample of data to demonstrate that the medical service or technology 
meets the high-cost threshold. Complete application information, along 
with final deadlines for submitting a full application, will be posted 
as it becomes available on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html. To allow interested parties to identify the new medical 
services or technologies under review before the publication of the 
proposed rule for FY 2017, the CMS Web site also will post the tracking 
forms completed by each applicant.
2. Public Input Before Publication of a Notice of Proposed Rulemaking 
on Add-On Payments
    Section 1886(d)(5)(K)(viii) of the Act, as amended by section 
503(b)(2) of Public Law 108-173, provides for a mechanism for public 
input before publication of a notice of proposed rulemaking regarding 
whether a medical service or technology represents a substantial 
clinical improvement or advancement. The process for evaluating new 
medical service and technology applications requires the Secretary to--
     Provide, before publication of a proposed rule, for public 
input regarding whether a new service or technology represents an 
advance in medical technology that substantially improves the diagnosis 
or treatment of Medicare beneficiaries;
     Make public and periodically update a list of the services 
and technologies for which applications for add-on payments are 
pending;
     Accept comments, recommendations, and data from the public 
regarding whether a service or technology represents a substantial 
clinical improvement; and
     Provide, before publication of a proposed rule, for a 
meeting at which organizations representing hospitals, physicians, 
manufacturers, and any other interested party may present comments, 
recommendations, and data regarding whether a new medical service or 
technology represents a substantial clinical improvement to the 
clinical staff of CMS.
    In order to provide an opportunity for public input regarding add-
on payments for new medical services and technologies for FY 2016 prior 
to publication of the FY 2016 IPPS/LTCH PPS proposed rule, we published 
a notice in the Federal Register on November 21, 2014 (79 FR 69490), 
and held a town hall meeting at the CMS Headquarters Office in 
Baltimore, MD, on February 3, 2015. In the announcement notice for the 
meeting, we stated that the opinions and alternatives provided during 
the meeting would assist us in our evaluations of applications by 
allowing public discussion of the substantial clinical improvement 
criterion for each of the FY 2016 new medical service and technology 
add-on payment applications before the publication of the FY 2016 IPPS/
LTCH PPS proposed rule.
    Approximately 95 individuals registered to attend the town hall 
meeting in person, while additional individuals listened over an open 
telephone line. We also live-streamed the town hall meeting and posted 
the town hall on the CMS YouTube Web page at: https://www.youtube.com/watch?v=dn-R5KGQu-M. We considered each applicant's presentation made 
at the town hall meeting, as well as written comments submitted on the 
applications that were received by the due date of January 19, 2015, in 
our evaluation of the new technology add-on payment applications for FY 
2016 in this proposed rule.
    In response to the published notice and the New Technology Town 
Hall meeting, we received written comments regarding the applications 
for FY 2016 new technology add-on payments. We summarize these comments 
in the preamble of this proposed rule or, if applicable, indicate that 
there were no comments received, at the end of each discussion of the 
individual applications in this proposed rule.
    One commenter provided comments that were unrelated to the 
``substantial clinical improvement'' criterion. As explained above and 
in the Federal Register notice announcing the New Technology Town Hall 
meeting (79 FR 69490 through 69492), the purpose of the meeting was 
specifically to discuss the substantial clinical improvement criterion 
in regard to pending new technology add-on payment applications for FY 
2016. Therefore, we are not summarizing the commenter's comments in 
this proposed rule. The commenter is welcome to resubmit its comments 
in response to proposals presented in this proposed rule.
    Comment: One commenter stated that antibiotics are unique because 
their development and use present many challenges that are not 
applicable to other drugs or devices seeking approval for new 
technology add-on payments. The commenter urged CMS to utilize the 
expertise of the infectious diseases community when determining how to 
evaluate applications for new antibiotics for new technology add-on 
payments.
    The commenter further stated that because superiority studies 
cannot be conducted for most serious infections, the most appropriate 
evaluation of superiority for many new antibiotics is a 
``noninferiority'' clinical trial, which is designed to determine if 
the experimental drug is similar in efficacy to a standard drug 
currently available on the market. The commenter noted that, recently, 
the FDA has demonstrated increased willingness to consider approving 
new antibiotics if efficacy can be proven based on achieved, well-
defined, and statistically validated noninferiority margins. The 
commenter encouraged CMS to consider the proven efficacy of these 
antibiotics based on these criteria when determining whether to approve 
a new antibiotic for new technology add-on payment. The commenter also 
urged CMS to consider carefully analyzed and peer-reviewed safety, 
utilization, and economics data when such data are available to support 
the approval of a new antibiotic for new technology add-on payment. The 
commenter believed that these considerations could increase the types 
of information that would be used to support the approval of new drugs 
for which superiority trials are inappropriate or not feasible or both.
    The commenter also believed it is critical that CMS maintain an 
ongoing dialogue with the FDA as well as nongovernment experts in 
antibiotic resistance and antibiotic drug development in order to more 
fully understand the highly complex and unique issues regarding the 
type of data available for the study and approval of new antibiotics.
    Response: In our evaluation of new technology applications, we rely 
on the recommendations of our clinical advisors. We also consider all 
clinical

[[Page 24421]]

data provided by the applicant in our determination of whether a 
technology is eligible for new technology add-on payments. In addition, 
we summarize each application and invite the public to provide their 
comments and expertise on any new technology application under 
consideration during the comment period for the proposed rule. We also 
work with the FDA in instances where guidance is necessary to 
understand the complexities of a new technology. We appreciate the 
commenter's input, and we will further consider these comments in 
future rulemakings.
    We note that the commenter provided comments that were unrelated to 
the substantial clinical improvement criterion. As noted above, the 
purpose of the new technology town hall meeting was specifically to 
discuss the substantial clinical improvement criterion in regard to 
pending new technology add-on payment applications for FY 2016. 
Therefore, we are not summarizing these comments in this proposed rule. 
The commenter is welcome to resubmit its comments in response to 
proposals presented in this proposed rule.
3. Implementation of ICD-10-PCS Section ``X'' Codes for Certain New 
Medical Services and Technologies for FY 2016
    As discussed in section II.G.1.a. of the preamble of this proposed 
rule, health plans and providers are required, as of October 1, 2015, 
to use the ICD-10 coding system (ICD-10-PCS codes for procedures and 
ICD-10-CM codes for diagnosis), instead of the ICD-9-CM coding system, 
to report diagnoses and procedures for Medicare hospital inpatient 
services provided to Medicare beneficiaries as classified under the MS-
DRG system and paid for under the IPPS. HIPAA covered entities will 
continue to use ICD-9-CM coding practices and principles through 
September 30, 2015. We refer readers to section II.G.1.a. of the 
preamble of this proposed rule for a complete discussion of the 
adoption of the ICD-10 coding system.
    As part of the transition to the ICD-10-CM/PCS coding system, at 
the September 23-24, 2014 ICD-10 Coordination and Maintenance Committee 
meeting, CMS received a request to create a new section within the ICD-
10-PCS to capture new medical services and technologies that might not 
appropriately align with the current structure of the ICD-10-PCS codes. 
Examples of these types of new medical services and technologies 
included drugs, biologicals, and newer medical devices being tested in 
clinical trials that are not currently captured within the ICD-9-CM or 
the ICD-10-PCS. The requestor indicated that there may be a need to 
identify and report these technologies and inpatient services for 
purposes of approving new technology add-on payment applications and 
initiating subsequent new technology add-on payments based on approval 
or tracking and analyzing the use of these new technologies and 
services. Although several commenters have opposed including these 
types of technologies and services within the current structure of the 
ICD-10-PCS codes during past ICD-10 Coordination and Maintenance 
Committee meetings, as well as in public comments, CMS has evaluated 
these suggestions and considered them to be valid. As a result, CMS has 
created a new component within the ICD-10-PCS codes, labeled Section 
``X'' codes, to identify and describe these new technologies and 
services. The new Section ``X'' codes identify new medical services and 
technologies that are not usually captured by coders, or that do not 
usually have the desired specificity within the current ICD-10-PCS 
structure required to capture the use of these new services and 
technologies. As mentioned earlier, examples of these types of services 
and technologies include specific drugs, biologicals, and newer medical 
devices being tested in clinical trials. The new Section ``X'' codes 
within the ICD-10-PCS structure will be implemented on October 1, 2015, 
and will be used to identify new technologies and medical services 
approved under the new technology add-on payment policy for payment 
purposes beginning October 1, 2015. An overview of Section ``X'' codes 
was provided at the March 18-19, 2015 ICD-10 Coordination and 
Maintenance Committee meeting. Further information regarding the new 
Section ``X'' codes and their use within the ICD-10-PCS can be found on 
the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html 
through the ``CMS Coordination and Maintenance Committee Meeting'' 
link.
    The ICD-10-PCS includes a new section containing the new Section 
``X'' codes, which will be used beginning FY 2016. Decisions regarding 
changes to ICD-10-PCS Section ``X'' codes will be handled in the same 
manner as the decisions for all of the other ICD-10-PCS code changes. 
That is, proposals to create, delete, or revise Section ``X'' codes 
under the ICD-10-PCS structure will be referred to the ICD-10 
Coordination and Maintenance Committee. In addition, several of the new 
medical services and technologies that have been, or may be, approved 
for new technology add-on payments may now, and in the future, be 
assigned a Section ``X'' code within the structure of the ICD-10-PCS. 
The FY 2016 ICD-10-PCS Section ``X'' codes will be posted in June 2015 
on the Internet via the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/index.html under the links on the left side of the Web 
page.
4. Proposed FY 2016 Status of Technologies Approved for FY 2015 Add-On 
Payments
a. Glucarpidase (Voraxaze[supreg])
    BTG International, Inc. submitted an application for new technology 
add-on payments for Glucarpidase (Voraxaze[supreg]) for FY 2013. 
Glucarpidase is used in the treatment of patients who have been 
diagnosed with toxic methotrexate (MTX) concentrations as of result of 
renal impairment. The administration of Glucarpidase causes a rapid and 
sustained reduction of toxic MTX concentrations.
    Voraxaze[supreg] was approved by the FDA on January 17, 2012. 
Beginning in 1993, certain patients could obtain expanded access for 
treatment use to Voraxaze[supreg] as an investigational drug. Since 
2007, the applicant has been authorized to recover the costs of making 
Voraxaze[supreg] available through its expanded access program. We 
describe expanded access for treatment use of investigational drugs and 
authorization to recover certain costs of investigational drugs in the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53346 through 53350). 
Voraxaze[supreg] was available on the market in the United States as a 
commercial product to the larger population as of April 30, 2012. In 
the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27936 through 27939), we 
expressed concerns about whether Voraxaze[supreg] could be considered 
new for FY 2013. After consideration of all of the public comments 
received, in the FY 2013 IPPS/LTCH PPS final rule, we stated that we 
considered Voraxaze[supreg] to be ``new'' as of April 30, 2012, which 
is the date of market availability.
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology payments for Voraxaze[supreg] 
and consideration of the public comments we received in response to the 
FY 2013 IPPS/LTCH PPS proposed rule, we approved Voraxaze[supreg] for 
new technology add-on payments for FY 2013. Cases of Voraxaze[supreg] 
are identified with ICD-9-CM procedure code 00.95 (Injection or

[[Page 24422]]

infusion of glucarpidase). As stated in the FY 2015 IPPS/LTCH PPS final 
rule correction notice (79 FR 59679), the cost of Voraxaze[supreg] is 
$23,625 per vial. The applicant stated that an average of four vials is 
used per Medicare beneficiary. Therefore, the average cost per case for 
Voraxaze[supreg] is $94,500 ($23,625 x 4). Under Sec.  412.88(a)(2), 
new technology add-on payments are limited to the lesser of 50 percent 
of the average cost of the technology or 50 percent of the costs in 
excess of the MS-DRG payment for the case. As a result, the maximum new 
technology add-on payment for Voraxaze[supreg] is $47,250 per case.
    As stated above, the new technology add-on payment regulations 
provide that ``a medical service or technology may be considered new 
within 2 or 3 years after the point at which data begin to become 
available reflecting the ICD-9-CM code assigned to the new service or 
technology'' (Sec.  412.87(b)(2)). Our practice has been to begin and 
end new technology add-on payments on the basis of a fiscal year, and 
we have generally followed a guideline that uses a 6-month window 
before and after the start of the fiscal year to determine whether to 
extend the new technology add-on payment for an additional fiscal year. 
In general, we extend add-on payments for an additional year only if 
the 3-year anniversary date of the product's entry on the market occurs 
in the latter half of the fiscal year (70 FR 47362).
    With regard to the newness criterion for Voraxaze[supreg], we 
considered the beginning of the newness period to commence when 
Voraxaze[supreg] was first made available on the U.S. market on April 
30, 2012. Because the 3-year anniversary date for Voraxaze[supreg] 
occurred in the latter half of FY 2015 (April 30, 2015), in the FY 2015 
IPPS/LTCH PPS final rule, we continued new technology add-on payments 
for this technology for FY 2015 (79 FR 49918). However, for FY 2016, 
the 3-year anniversary date of the product's entry on the U.S. market 
(April 30, 2015) occurs prior to the beginning of FY 2016. Therefore, 
we are proposing to discontinue new technology add-on payments for 
Voraxaze[supreg] for FY 2016. We are inviting public comments on this 
proposal.
b. Zenith[supreg] Fenestrated Abdominal Aortic Aneurysm (AAA) 
Endovascular Graft
    Cook[supreg] Medical submitted an application for new technology 
add-on payments for the Zenith[supreg] Fenestrated Abdominal Aortic 
Aneurysm (AAA) Endovascular Graft (Zenith[supreg] F. Graft) for FY 
2013. The applicant stated that the current treatment for patients who 
have had an AAA is an endovascular graft. The applicant explained that 
the Zenith[supreg] F. Graft is an implantable device designed to treat 
patients who have an AAA and who are anatomically unsuitable for 
treatment with currently approved AAA endovascular grafts because of 
the length of the infrarenal aortic neck. The applicant noted that, 
currently, an AAA is treated through an open surgical repair or medical 
management for those patients not eligible for currently approved AAA 
endovascular grafts.
    With respect to newness, the applicant stated that FDA approval for 
the use of the Zenith[supreg] F. Graft was granted on April 4, 2012. In 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53360 through 53365), we 
stated that because the Zenith[supreg] F. Graft was approved by the FDA 
on April 4, 2012, we believed that the Zenith[supreg] F. Graft met the 
newness criterion as of that date.
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology add-on payments for the 
Zenith[supreg] F. Graft and consideration of the public comments we 
received in response to the FY 2013 IPPS/LTCH PPS proposed rule, we 
approved the Zenith[supreg] F. Graft for new technology add-on payments 
for FY 2013. Cases involving the Zenith[supreg] F. Graft that are 
eligible for new technology add-on payments currently are identified by 
ICD-9-CM procedure code 39.78 (Endovascular implantation of branching 
or fenestrated graft(s) in aorta). In the application, the applicant 
provided a breakdown of the costs of the Zenith[supreg] F. Graft. The 
total cost of the Zenith[supreg] F. Graft utilizing bare metal (renal) 
alignment stents was $17,264. Of the $17,264 in costs for the 
Zenith[supreg] F. Graft, $921 is for components that are used in a 
standard Zenith AAA Endovascular Graft procedure. Because the costs for 
these components are already reflected within the MS-DRGs (and are no 
longer ``new''), in the FY 2013 IPPS/LTCH PPS final rule, we stated 
that we do not believe it is appropriate to include these costs in our 
calculation of the maximum cost to determine the maximum add-on payment 
for the Zenith[supreg] F. Graft. Therefore, the total maximum cost for 
the Zenith[supreg] F. Graft is $16,343 ($17,264-$921). Under Sec.  
412.88(a)(2), new technology add-on payments are limited to the lesser 
of 50 percent of the average cost of the device or 50 percent of the 
costs in excess of the MS-DRG payment for the case. As a result, the 
maximum add-on payment for a case involving the Zenith[supreg] F. Graft 
is $8,171.50.
    With regard to the newness criterion for the Zenith[supreg] F. 
Graft, we considered the beginning of the newness period to commence 
when the Zenith[supreg] F. Graft was approved by the FDA on April 4, 
2012. Because the 3-year anniversary date of the entry of the 
Zenith[supreg] F. Graft on the U.S. market occurred in the second half 
of FY 2015 (April 4, 2015), in the FY 2015 IPPS/LTCH PPS final rule, we 
continued new technology add-on payments for this technology for FY 
2015 (79 FR 49922). However, for FY 2016, the 3-year anniversary date 
of the product's entry on the U.S. market (April 4, 2015) occurs prior 
to the beginning of FY 2016. Therefore, we are proposing to discontinue 
new technology add-on payments for the Zenith[supreg] F. Graft for FY 
2016. We are inviting public comments on this proposal.
c. KcentraTM
    CSL Behring submitted an application for new technology add-on 
payments for KcentraTM for FY 2014. KcentraTM is 
a replacement therapy for fresh frozen plasma (FFP) for patients with 
an acquired coagulation factor deficiency due to warfarin and who are 
experiencing a severe bleed. KcentraTM contains the Vitamin 
K dependent coagulation factors II, VII, IX and X, together known as 
the prothrombin complex, and antithrombotic proteins C and S. Factor IX 
is the lead factor for the potency of the preparation. The product is a 
heat-treated, non-activated, virus filtered and lyophilized plasma 
protein concentrate made from pooled human plasma. KcentraTM 
is available as a lyophilized powder that needs to be reconstituted 
with sterile water prior to administration via intravenous infusion. 
The product is dosed based on Factor IX units. Concurrent Vitamin K 
treatment is recommended to maintain blood clotting factor levels once 
the effects of KcentraTM have diminished.
    KcentraTM was approved by the FDA on April 29, 2013. In 
the FY 2014 IPPS/LTCH PPS final rule, we finalized new ICD-9-CM 
procedure code 00.96 (Infusion of 4-Factor Prothrombrin Complex 
Concentrate) which uniquely identifies KcentraTM.
    In the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27538), we noted 
that we were concerned that KcentraTM may be substantially 
similar to FFP and/or Vitamin K therapy. In the FY 2014 IPPS/LTCH PPS 
final rule, in response to comments submitted by the manufacturer, we 
stated that we agree that KcentraTM may be used in a patient 
population that is experiencing an acquired coagulation factor 
deficiency due to Warfarin and who are

[[Page 24423]]

experiencing a severe bleed currently but are ineligible for FFP, 
particularly for use by IgA deficient patients and other patient 
populations that have no other treatment option to resolve severe 
bleeding in the context of an acquired Vitamin K deficiency. In 
addition, FFP is limited because it requires special storage conditions 
while KcentraTM is stable for up to 36 months at room 
temperature thus allowing hospitals that otherwise would not have 
access to FFP (for example, small rural hospitals as discussed by the 
applicant in its comments) to keep a supply of KcentraTM and 
treat patients who would possibly have no access to FFP. We noted that 
FFP is considered perishable and can be scarce by nature (due to 
production and other market limitations) thus making some hospitals 
unable to store FFP, which limits access to certain patient populations 
in certain locations. Therefore, we stated that we believe that 
KcentraTM provides a therapeutic option for a new patient 
population and is not substantially similar to FFP. Also, we gave 
credence to the information presented by the manufacturer that 
KcentraTM provides a simple and rapid repletion relative to 
FFP and reduces the risk of a transfusion reaction relative to FFP 
because it does not contain ABO antibodies and does not require ABO 
typing. As a result, we concluded that KcentraTM is not 
substantially similar to FFP, and that it meets the newness criterion.
    After evaluation of the newness, cost, and substantial clinical 
improvement criteria for new technology add-on payments for 
KcentraTM and consideration of the public comments we 
received in response to the FY 2014 IPPS/LTCH PPS proposed rule, we 
approved KcentraTM for new technology add-on payments for FY 
2014 (78 FR 50575 through 50580). Cases involving KcentraTM 
that are eligible for new technology add-on payments currently are 
identified by ICD-9-CM procedure code 00.96. In the application, the 
applicant estimated that the average Medicare beneficiary would require 
an average dosage of 2500 International Units (IU). Vials contain 500 
IU at a cost of $635 per vial. Therefore, cases of KcentraTM 
would incur an average cost per case of $3,175 ($635 x 5). Under Sec.  
412.88(a)(2), new technology add-on payments are limited to the lesser 
of 50 percent of the average cost of the technology or 50 percent of 
the costs in excess of the MS-DRG payment for the case. As a result, 
the maximum add-on payment for a case of KcentraTM was 
$1,587.50 for FY 2014.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50579), we stated 
that new technology add-on payments for KcentraTM would not 
be available with respect to discharges for which the hospital received 
an add-on payment for a blood clotting factor administered to a 
Medicare beneficiary with hemophilia who is a hospital inpatient. Under 
section 1886(d)(1)(A)(iii) of the Act, the national adjusted DRG 
prospective payment rate is ``the amount of the payment with respect to 
the operating costs of inpatient hospital services (as defined in 
subsection (a)(4) of this section)'' for discharges on or after April 
1, 1988. Section 1886(a)(4) of the Act excludes from the term 
``operating costs of inpatient hospital services'' the costs with 
respect to administering blood clotting factors to individuals with 
hemophilia. The costs of administering a blood clotting factor to a 
Medicare beneficiary who has hemophilia and is a hospital inpatient are 
paid separately from the IPPS. (For information on how the blood 
clotting factor add-on payment is made, we refer readers to Section 
20.7.3, Chapter 3, of the Medicare Claims Processing Manual, which can 
be downloaded from the CMS Web site at: http://cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf.) In addition, we 
stated that if KcentraTM is approved by the FDA as a blood 
clotting factor, we believed that it may be eligible for blood clotting 
factor add-on payments when administered to Medicare beneficiaries with 
hemophilia. We make an add-on payment for KcentraTM for such 
discharges in accordance with our policy for payment of a blood 
clotting factor, and the costs would be excluded from the operating 
costs of inpatient hospital services as set forth in section 1886(a)(4) 
of the Act.
    Section 1886(d)(5)(K)(i) of the Act requires the Secretary to 
``establish a mechanism to recognize the costs of new medical services 
and technologies under the payment system established under this 
subsection'' beginning with discharges on or after October 1, 2001. We 
believe that it is reasonable to interpret this requirement to mean 
that the payment mechanism established by the Secretary recognizes only 
costs for those items that would otherwise be paid based on the 
prospective payment system (that is, ``the payment system established 
under this subsection''). As noted above, under section 
1886(d)(1)(A)(iii) of the Act, the national adjusted DRG prospective 
payment rate is the amount of payment for the operating costs of 
inpatient hospital services, as defined in section 1886(a)(4) of the 
Act, for discharges on or after April 1, 1988. We understand this to 
mean that a new medical service or technology must be an operating cost 
of inpatient hospital services paid based on the prospective payment 
system, and not excluded from such costs, in order to be eligible for 
the new technology add-on payment. We pointed out that new technology 
add-on payments are based on the operating costs per case relative to 
the prospective payment rate as described in Sec.  412.88. Therefore, 
we believe that new technology add-on payments are appropriate only 
when the new technology is an operating cost of inpatient hospital 
services and are not appropriate when the new technology is excluded 
from such costs.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50579), we stated 
that we believe that hospitals may only receive new technology add-on 
payments for discharges where KcentraTM is an operating cost 
of inpatient hospital services. In other words, a hospital would not be 
eligible to receive the new technology add-on payment when it is 
administering KcentraTM in treating a Medicare beneficiary 
who has hemophilia. In those instances, KcentraTM is 
specifically excluded from the operating costs of inpatient hospital 
services in accordance with section 1886(a)(4) of the Act and paid 
separately from the IPPS. However, when a hospital administers 
KcentraTM to a Medicare beneficiary who does not have 
hemophilia, the hospital would be eligible for a new technology add-on 
payment because KcentraTM would not be excluded from the 
operating costs of inpatient hospital services. Therefore, discharges 
where the hospital receives a blood clotting factor add-on payment are 
not eligible for a new technology add-on payment for the blood clotting 
factor. We refer readers to Section 20.7.3, Chapter 3, of the Medicare 
Claims Processing Manual for a complete discussion on when a blood 
clotting factor add-on payment is made. The manual can be downloaded 
from the CMS Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf.
    With regard to the newness criterion for KcentraTM, we 
considered the beginning of the newness period to commence when 
KcentraTM was approved by the FDA on April 29, 2013. Because 
the 3-year anniversary date of the entry of KcentraTM on the 
U.S. market will occur in the second half of FY 2016 (April 29, 2016), 
we are proposing to continue new technology add-on payments for this 
technology for

[[Page 24424]]

FY 2016. We are inviting public comments on this proposal.
    Because we are adopting the ICD-10 coding system, effective October 
1, 2015, as discussed in section II.G.1.a. of the preamble of this 
proposed rule, for FY 2016, we are proposing to identify and make new 
technology add-on payments for cases involving the KcentraTM 
technology with ICD-10-PCS procedure code 30283B1 (Transfusion of 
nonautologous 4-factor prothrombin complex concentrate into vein, 
percutaneous approach). As stated above, new technology add-on payments 
for KcentraTM would not be available with respect to 
discharges for which the hospital received an add-on payment for a 
blood clotting factor administered to a Medicare beneficiary with 
hemophilia who is a hospital inpatient. For information on how the 
blood clotting factor add-on payment is made (including a list of ICD-
10 diagnosis codes that would negate the eligibility of a case for new 
technology add-on payments, if reported in combination with the 
proposed ICD-10 procedure code used to identify cases involving the 
KcentraTM technology), we refer readers to Section 20.7.3, 
Chapter 3, of the Medicare Claims Processing Manual, which can be 
downloaded from the CMS Web site at: http://cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c03.pdf. The maximum new 
technology add-on payment for a case involving the KcentraTM 
technology would remain at $1,587.50 for FY 2016. We are inviting 
public comments on this proposal.
d. Argus[supreg] II Retinal Prosthesis System
    Second Sight Medical Products, Inc. submitted an application for 
new technology add-on payments for the Argus[supreg] II Retinal 
Prosthesis System (Argus[supreg] II System) for FY 2014. The 
Argus[supreg] II System is an active implantable medical device that is 
intended to provide electrical stimulation of the retina to induce 
visual perception in patients who are profoundly blind due to retinitis 
pigmentosa (RP). These patients have bare or no light perception in 
both eyes. The system employs electrical signals to bypass dead photo-
receptor cells and stimulate the overlying neurons according to a real-
time video signal that is wirelessly transmitted from an externally 
worn video camera. The Argus[supreg] II implant is intended to be 
implanted in a single eye, typically the worse-seeing eye. Currently, 
bilateral implants are not intended for this technology. According to 
the applicant, the surgical implant procedure takes approximately 4 
hours and is performed under general anesthesia.
    The Argus[supreg] II System consists of three primary components: 
(1) An implant which is an epiretinal prosthesis that is fully 
implanted on and in the eye (that is, there are no percutaneous leads); 
(2) external components worn by the user; and (3) a ``fitting'' system 
for the clinician that is periodically used to perform diagnostic tests 
with the system and to custom-program the external unit for use by the 
patient. We describe these components more fully below.
     Implant: The retinal prosthesis implant is responsible for 
receiving information from the external components of the system and 
electrically stimulating the retina to induce visual perception. The 
retinal implant consists of: (a) A receiving coil for receiving 
information and power from the external components of the Argus[supreg] 
II System; (b) electronics to drive stimulation of the electrodes; and 
(c) an electrode array. The receiving coil and electronics are secured 
to the outside of the eye using a standard scleral band and sutures, 
while the electrode array is secured to the surface of the retina 
inside the eye by a retinal tack. A cable, which passes through the eye 
wall, connects the electronics to the electrode array. A pericardial 
graft is placed over the extra-ocular portion on the outside of the 
eye.
     External Components: The implant receives power and data 
commands wirelessly from an external unit of components, which include 
the Argus II Glasses and Video Processing Unit (VPU). A small 
lightweight video camera and transmitting coil are mounted on the 
glasses. The telemetry coils and radio-frequency system are mounted on 
the temple arm of the glasses for transmitting data from the VPU to the 
implant. The glasses are connected to the VPU by a cable. This VPU is 
worn by the patient, typically on a belt or a strap, and is used to 
process the images from the video camera and convert the images into 
electrical stimulation commands, which are transmitted wirelessly to 
the implant.
     ``Fitting System'': To be able to use the Argus[supreg] II 
System, a patient's VPU needs to be custom-programmed. This process, 
which the applicant called ``fitting'', occurs in the hospital/clinic 
shortly after the implant surgery and then periodically thereafter as 
needed. The clinician/physician also uses the ``Fitting System'' to run 
diagnostic tests (for example, to obtain electrode and impedance 
waveform measurements or to check the radio-frequency link between the 
implant and external unit). This ``Fitting System'' can also be 
connected to a ``Psychophysical Test System'' to evaluate patients' 
performance with the Argus[supreg] II System on an ongoing basis.
    These three components work together to stimulate the retina and 
allow a patient to perceive phosphenes (spots of light), which they 
then need to learn to interpret. While using the Argus[supreg] II 
System, the video camera on the patient-worn glasses captures a video 
image. The video camera signal is sent to the VPU, which processes the 
video camera image and transforms it into electrical stimulation 
patterns. The electrical stimulation data are then sent to a 
transmitter coil mounted on the glasses. The transmitter coil sends 
both data and power via radio-frequency (RF) telemetry to the implanted 
retinal prosthesis. The implant receives the RF commands and delivers 
stimulation to the retina via an array of electrodes that is secured to 
the retina with a retinal tack.
    In patients with RP, the photoreceptor cells in the retina, which 
normally transduce incoming light into an electro-chemical signal, have 
lost most of their function. The stimulation pulses delivered to the 
retina via the electrode array of the Argus[supreg] II System are 
intended to mimic the function of these degenerated photoreceptors 
cells. These pulses induce cellular responses in the remaining, viable 
retinal nerve cells that travel through the optic nerve to the visual 
cortex where they are perceived as phosphenes (spots of light). 
Patients learn to interpret the visual patterns produced by these 
phosphenes.
    With respect to the newness criterion, according to the applicant, 
the FDA designated the Argus[supreg] II System a Humanitarian Use 
Device in May 2009 (HUD designation #09-0216). The applicant submitted 
a Humanitarian Device Exemption (HDE) application (#H110002) to the FDA 
in May 2011 to obtain market approval for the Argus[supreg] II System. 
The HDE was referred to the Ophthalmic Devices Panel of the FDA's 
Medical Devices Advisory Committee for review and recommendation. At 
the Panel's meeting held on September 28, 2012, the Panel voted 19 to 0 
that the probable benefits of the Argus[supreg] II System outweigh the 
risks of the system for the proposed indication for use. The applicant 
received the HDE approval from the FDA on February 14, 2013. However, 
in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49924 through 49925), we 
discussed comments we had received informing CMS that the Argus[supreg] 
II System was not available on the U.S. market until December 20, 2013. 
The applicant explained that, as part of the lengthy approval process, 
it was

[[Page 24425]]

required to submit a request to the Federal Communications Commission 
(FCC) for a waiver of section 15.209(a) of the FCC rules that would 
allow the applicant to apply for FCC authorization to utilize this 
specific RF band. The FCC approved the applicant's waiver request on 
November 30, 2011. After receiving the FCC waiver of the section 
15.209(a) rules, the applicant requested and obtained a required Grant 
of Equipment Authorization to utilize the specific RF band, which the 
FCC issued on December 20, 2013. Therefore, the applicant stated that 
the date the Argus[supreg] II System first became available for 
commercial sale in the United States was December 20, 2013. We agreed 
with the applicant that, due to the delay, the date of newness for the 
Argus[supreg] II System was December 20, 2013, instead of February 14, 
2013.
    Currently there are no other approved treatments for patients 
diagnosed with severe to profound RP. The Argus[supreg] II System has 
an IDE number of G050001 and is a Class III device. In the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50580 through 50583), we finalized new 
ICD-9-CM procedure code 14.81 (Implantation of epiretinal visual 
prosthesis), which uniquely identifies the Argus[supreg] II System. The 
other two codes finalized by CMS are for removal, revision, or 
replacement of the device.
    After evaluation of the new technology add-on payment application 
and consideration of public comments received, we concluded that the 
Argus[supreg] II System met all of the new technology add-on payment 
policy criteria. Therefore, we approved the Argus[supreg] II System for 
new technology add-on payments in FY 2014 (78 FR 50580 through 50583). 
Cases involving the Argus[supreg] II System that are eligible for new 
technology add-on payments currently are identified by ICD-9-CM 
procedure code 14.81. We note that section 1886(d)(5)(K)(i) of the Act 
requires that the Secretary establish a mechanism to recognize the 
costs of new medical services or technologies under the payment system 
established under that subsection, which establishes the system for 
paying for the operating costs of inpatient hospital services. The 
system of payment for capital costs is established under section 
1886(g) of the Act, which makes no mention of any add-on payments for a 
new medical service or technology. Therefore, it is not appropriate to 
include capital costs in the add-on payments for a new medical service 
or technology. In the application, the applicant provided a breakdown 
of the costs of the Argus[supreg] II System. The total operating cost 
of the Argus[supreg] II System is $144,057.50. Under Sec.  
412.88(a)(2), new technology add-on payments are limited to the lesser 
of 50 percent of the average cost of the device or 50 percent of the 
costs in excess of the MS-DRG payment for the case. As a result, the 
maximum add-on payment for a case involving the Argus[supreg] II System 
for FY 2014 was $72,028.75.
    With regard to the newness criterion for the Argus[supreg] II 
System, we considered the beginning of the newness period to commence 
when the Argus[supreg] II System became available on the U.S. market on 
December 20, 2013. Because the 3-year anniversary date of the entry of 
the Argus[supreg] II System on the U.S. market will occur in the first 
half of FY 2017 (December 23, 2016), we are proposing to continue new 
technology add-on payments for this technology for FY 2016. We are 
inviting public comments on this proposal.
    Because we are adopting the ICD-10 coding system, effective October 
1, 2015, as discussed in section II.G.1.a. of the preamble of this 
proposed rule, for FY 2016, we are proposing to identify and make new 
technology add-on payments for cases involving the Argus[supreg] II 
System when one of the following ICD-10-PCS procedure codes is 
reported: 08H005Z (Insertion of epiretinal visual prosthesis into right 
eye, open approach) or 08H105Z (Insertion of epiretinal visual 
prosthesis into left eye, open approach). The maximum new technology 
add-on payment for a case involving the Argus[supreg] II System would 
remain at $72,028.75 for FY 2016. We are inviting public comments on 
this proposal.
e. Zilver[supreg] PTX[supreg] Drug Eluting Peripheral Stent
    Cook[supreg] Medical submitted an application for new technology 
add-on payments for the Zilver[supreg] PTX[supreg] Drug Eluting 
Peripheral Stent (Zilver[supreg] PTX[supreg]) for FY 2014. The 
Zilver[supreg] PTX[supreg] is intended for use in the treatment of 
peripheral artery disease (PAD) of the above-the-knee femoropopliteal 
arteries (superficial femoral arteries). According to the applicant, 
the stent is percutaneously inserted into the artery(s), usually by 
accessing the common femoral artery in the groin. The applicant stated 
that an introducer catheter is inserted over the wire guide and into 
the target vessel where the lesion will first be treated with an 
angioplasty balloon to prepare the vessel for stenting. The applicant 
indicated that the stent is self-expanding, made of nitinol (nickel 
titanium), and is coated with the drug Paclitaxel. Paclitaxel is a drug 
approved for use as an anticancer agent and for use with coronary 
stents to reduce the risk of renarrowing of the coronary arteries after 
stenting procedures.
    The applicant received FDA approval on November 15, 2012, for the 
Zilver[supreg] PTX[supreg]. The applicant maintains that the 
Zilver[supreg] PTX[supreg] is the first drug-eluting stent used for 
superficial femoral arteries. The technology is currently described by 
ICD-9-CM procedure code 00.60 (Insertion of drug-eluting stent(s) of 
the superficial femoral artery).
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50583 through 
50585), after evaluation of the new technology add-on payment 
application and consideration of the public comments received, we 
approved the Zilver[supreg] PTX[supreg] for new technology add-on 
payments in FY 2014. Cases involving the Zilver[supreg] PTX[supreg] 
that are eligible for new technology add-on payments are identified by 
ICD-9-CM procedure code 00.60. As explained in the FY 2014 IPPS/LTCH 
PPS final rule, to determine the amount of Zilver[supreg] PTX[supreg] 
stents per case, instead of using the amount of stents used per case 
based on the ICD-9-CM codes, the applicant used an average of 1.9 
stents per case based on the Zilver[supreg] PTX[supreg] Global Registry 
Clinical Study. The applicant stated in its application that the 
anticipated cost per stent is approximately $1,795. Therefore, cases of 
the Zilver[supreg] PTX[supreg] would incur an average cost per case of 
$3,410.50 ($1,795 x 1.9). Under Sec.  412.88(a)(2), new technology add-
on payments are limited to the lesser of 50 percent of the average cost 
of the device or 50 percent of the costs in excess of the MS-DRG 
payment for the case. As a result, the maximum add-on payment for a 
case of the Zilver[supreg] PTX[supreg] was $1,705.25 for FY 2014.
    With regard to the newness criterion for the Zilver[supreg] 
PTX[supreg], we considered the beginning of the newness period to 
commence when the Zilver[supreg] PTX[supreg] was approved by the FDA on 
November 15, 2012. Because the 3-year anniversary date of the entry of 
the Zilver[supreg] PTX[supreg] on the U.S. market occurred after FY 
2015 (November 15, 2015), in the FY 2015 IPPS/LTCH PPS final rule, we 
continued new technology add-on payments for this technology for FY 
2015 (79 FR 49925). However, for FY 2016, the 3-year anniversary date 
of the product's entry on the U.S. market (November 15, 2015) occurs in 
the first half of FY 2016. Therefore, we are proposing to discontinue 
new technology add-on payments for the Zilver[supreg] PTX[supreg] for 
FY 2016. We are inviting public comments on this proposal.

[[Page 24426]]

f. CardioMEMSTM HF (Heart Failure) Monitoring System
    CardioMEMS, Inc. submitted an application for new technology add-on 
payment for FY 2015 for the CardioMEMSTM HF (Heart Failure) 
Monitoring System, which is an implantable hemodynamic monitoring 
system comprised of an implantable sensor/monitor placed in the distal 
pulmonary artery. Pulmonary artery hemodynamic monitoring is used in 
the management of heart failure. The CardioMEMSTM HF 
Monitoring System measures multiple pulmonary artery pressure 
parameters for an ambulatory patient to measure and transmit data via a 
wireless sensor to a secure Web site.
    The CardioMEMSTM HF Monitoring System utilizes 
radiofrequency (RF) energy to power the sensor and to measure pulmonary 
artery (PA) pressure and consists of three components: An Implantable 
Sensor with Delivery Catheter, an External Electronics Unit, and a 
Pulmonary Artery Pressure Database. The system provides the physician 
with the patient's PA pressure waveform (including systolic, diastolic, 
and mean pressures) as well as heart rate. The sensor is permanently 
implanted in the distal pulmonary artery using transcatheter techniques 
in the catheterization laboratory where it is calibrated using a Swan-
Ganz catheter. PA pressures are transmitted by the patient at home in a 
supine position on a padded antenna, pushing one button which records 
an 18-second continuous waveform. The data also can be recorded from 
the hospital, physician's office or clinic.
    The hemodynamic data, including a detailed waveform, are 
transmitted to a secure Web site that serves as the Pulmonary Artery 
Pressure Database, so that information regarding PA pressure is 
available to the physician or nurse at any time via the Internet. 
Interpretation of trend data allows the clinician to make adjustments 
to therapy and can be used along with heart failure signs and symptoms 
to adjust medications.
    The applicant believed that a large majority of patients receiving 
the sensor would be admitted as an inpatient to a hospital with a 
diagnosis of acute or chronic heart failure, which is typically 
described by ICD-9-CM diagnosis code 428.43 (Acute on chronic combined 
systolic and diastolic heart failure) and the sensor would be implanted 
during the inpatient stay. The applicant stated that for safety 
considerations, a small portion of these patients may be discharged and 
the sensor would be implanted at a future date in the hospital 
outpatient setting. In addition, there would likely be a group of 
patients diagnosed with chronic heart failure who are not currently 
hospitalized, but who have been hospitalized in the past few months for 
which the treating physician believes that regular pulmonary artery 
pressure readings are necessary to optimize patient management. 
Depending on the patient's status, the applicant stated that these 
patients may have the sensor implanted in the hospital inpatient or 
outpatient setting.
    The applicant received FDA approval on May 28, 2014. The 
CardioMEMSTM HF Monitoring System is currently described by 
ICD-9-CM procedure code 38.26 (Insertion of implantable pressure sensor 
without lead for intracardiac or great vessel hemodynamic monitoring).
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology payments for the 
CardioMEMSTM HF Monitoring System and consideration of the 
public comments we received in response to the FY 2015 IPPS/LTCH PPS 
proposed rule, we approved the CardioMEMSTM HF Monitoring 
System for new technology add-on payments for FY 2015 (79 FR 49940). 
Cases involving the CardioMEMSTM HF Monitoring System that 
are eligible for new technology add-on payments are identified by ICD-
9-CM procedure code 38.26 (Insertion of implantable wireless pressure 
sensor for intracardiac or great vessel hemodynamic monitoring), which 
was effective October 1, 2011. With the new technology add-on payment 
application, the applicant stated that the total operating cost of the 
CardioMEMSTM HF Monitoring System is $17,750. Under Sec.  
412.88(a)(2), new technology add-on payments are limited to the lesser 
of 50 percent of the average cost of the device or 50 percent of the 
costs in excess of the MS-DRG payment for the case. As a result, the 
maximum new technology add-on payment for a case involving the 
CardioMEMSTM HF Monitoring System is $8,875.
    With regard to the newness criterion for the 
CardioMEMSTM HF Monitoring System, we considered the 
beginning of the newness period to commence when the 
CardioMEMSTM HF Monitoring System was approved by the FDA on 
May 28, 2014. Because the 3-year anniversary date of the entry of the 
CardioMEMSTM HF Monitoring System on the U.S. market will 
occur in FY 2017 (May 28, 2017), we are proposing to continue new 
technology add-on payments for this technology for FY 2016. We are 
inviting public comments on this proposal.
    Because we are adopting the ICD-10 coding system, effective October 
1, 2015, as discussed in section II.G.1.a. of the preamble of this 
proposed rule, for FY 2016, we are proposing to identify and make new 
technology add-on payments for cases involving the 
CardioMEMSTM HF Monitoring System using either ICD-10-PCS 
procedure code 02HQ30Z (Insertion of pressure sensor monitoring device 
into right pulmonary artery, percutaneous approach) or ICD-10-PCS 
procedure code 02HR30Z (Insertion of pressure sensor monitoring device 
into left pulmonary artery, percutaneous approach). The maximum payment 
for a case involving the CardioMEMSTM HF Monitoring System 
would remain at $8,875 for FY 2016. We are inviting public comments on 
this proposal.
g. MitraClip[supreg] System
    Abbott Vascular submitted an application for new technology add-on 
payments for the MitraClip[supreg] System for FY 2015. The 
MitraClip[supreg] System is a transcatheter mitral valve repair system 
that includes a MitraClip[supreg] device implant, a Steerable Guide 
Catheter, and a Clip Delivery System. It is designed to perform 
reconstruction of the insufficient mitral valve for high-risk patients 
who are not candidates for conventional open mitral valve repair 
surgery.
    Mitral regurgitation (MR), also referred to as mitral insufficiency 
or mitral incompetence, occurs when the mitral valve fails to close 
completely causing the blood to leak or flow backwards (regurgitate) 
into the left ventricle. If the amount of blood that leaks backwards 
into the left ventricle is minimal, then intervention is usually not 
necessary. However, if the amount of blood that is regurgitated becomes 
significant, this can cause the left ventricle to work harder to meet 
the body's need for oxygenated blood. Severity levels of MR can range 
from grade 1+ through grade 4+. If left untreated, severe MR can lead 
to heart failure and death. The American College of Cardiology (ACC) 
and the American Heart Association (AHA) issued practice guidelines in 
2006 that recommended intervention for moderate/severe or severe MR 
(grade 3+ to 4+). The applicant stated that the MitraClip[supreg] 
System is ``indicated for percutaneous reduction of significant mitral 
regurgitation . . . in patients who have been determined to be at 
prohibitive risk for mitral value surgery by a heart team, which 
includes a cardiac surgeon experienced in mitral valve surgery and a 
cardiologist experienced in mitral valve disease and in whom existing 
comorbidities would not preclude the

[[Page 24427]]

expected benefit from correction of the mitral regurgitation.''
    The MitraClip[supreg] System mitral valve repair procedure is based 
on the double-orifice surgical repair technique that has been used as a 
surgical technique in open chest, arrested-heart surgery for the 
treatment of MR since the early 1990s. According to the applicant, in 
utilizing ``the double-orifice technique, a portion of the anterior 
leaflet is sutured to the corresponding portion of the posterior 
leaflet using standard techniques and forceps and suture, creating a 
point of permanent cooptation (``approximation'') of the two leaflets. 
When the suture is placed in the middle of the valve, the valve will 
have a functional double orifice during diastole.''
    With regard to the newness criterion, the MitraClip[supreg] System 
received a premarket approval from the FDA on October 24, 2013. The 
MitraClip[supreg] System is indicated ``for the percutaneous reduction 
of significant symptomatic mitral regurgitation (MR >= 3+) due to 
primary abnormality of the mitral apparatus (degenerative MR) in 
patients who have been determined to be at prohibitive risk for mitral 
valve surgery by a heart team, which includes a cardiac surgeon 
experienced in mitral valve surgery and a cardiologist experienced in 
mitral valve disease, and in whom existing comorbidities would not 
preclude the expected benefit from reduction of the mitral 
regurgitation.'' The MitraClip[supreg] System became immediately 
available on the U.S. market following FDA approval. The 
MitraClip[supreg] System is a Class III device, and has an 
investigational device exemption (IDE) for the EVEREST study 
(Endovascular Valve Edge-to-Edge Repair Study)--IDE G030061, and for 
the COAPT study (Cardiovascular Outcomes Assessment of the MitraClip 
Percutaneous Therapy for Health Failure Patients with Functional Mitral 
Regurgitation)--IDE G120024. Effective October 1, 2010, ICD-9-CM 
procedure code 35.97 (Percutaneous mitral valve repair with implant) 
was created to identify and describe the MitraClip[supreg] System 
technology.
    On August 7, 2014, CMS issued a National Coverage Decision (NCD) 
concerning Transcatheter Mitral Valve Repair procedures. We refer 
readers to the CMS Web site at: http://www.cms.gov/medicare-coverage-database/details/nca-tracking-sheet.aspx?NCAId=273 for information 
related to this NCD.
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology payments for the 
MitraClip[supreg] System and consideration of the public comments we 
received in response to the FY 2015 IPPS/LTCH PPS proposed rule, we 
approved the MitraClip[supreg] System for new technology add-on 
payments for FY 2015 (79 FR 49946). As discussed in the FY 2015 IPPS/
LTCH PPS final rule, this approval is on the basis of using the 
MitraClip[supreg] consistent with the NCD. Cases involving the 
MitraClip[supreg] System that are eligible for the new technology add-
on payments are currently identified by ICD-9-CM procedure code 35.97. 
The average cost of the MitraClip[supreg] System is reported as 
$30,000. Under section 412.88(a)(2), new technology add-on payments are 
limited to the lesser of 50 percent of the average cost of the device 
or 50 percent of the costs in excess of the MS-DRG payment for the 
case. As a result, the maximum new technology add-on payment for a case 
involving the MitraClip[supreg] System is $15,000 for FY 2015.
    With regard to the newness criterion for the MitraClip[supreg] 
System, we considered the beginning of the newness period to commence 
when the MitraClip[supreg] System was approved by the FDA on October 
24, 2013. Because the 3-year anniversary date of the entry of the 
MitraClip[supreg] System on the U.S. market will occur in FY 2017 
(October 24, 2016), we are proposing to continue new technology add-on 
payments for this technology for FY 2016. We are inviting public 
comments on this proposal.
    Because we are adopting the ICD-10 coding system, beginning October 
1, 2015, as discussed in section II.G.1.a, of the preamble of this 
proposed rule, for FY 2016, we are proposing to identify and make new 
technology add-on payments for cases involving the MitraClip[supreg] 
System using ICD-10-PCS procedure code 02UG3JZ (Supplement mitral valve 
with synthetic substitute, percutaneous approach). The maximum payment 
for a case involving the MitraClip[supreg] System would remain at 
$15,000 for FY 2016. We are inviting public comments on this proposal.
h. Responsive Neurostimulator (RNS[supreg]) System
    NeuroPace, Inc. submitted an application for new technology add-on 
payments for FY 2015 for the use of the RNS[supreg] System. (We note 
that the applicant submitted an application for new technology add-on 
payments for FY 2014, but failed to receive FDA approval prior to the 
July 1 deadline.) Seizures occur when brain function is disrupted by 
abnormal electrical activity. Epilepsy is a brain disorder 
characterized by recurrent, unprovoked seizures. According to the 
applicant, the RNS[supreg] System is the first implantable medical 
device (developed by NeuroPace, Inc.) for treating persons diagnosed 
with epilepsy whose partial onset seizures have not been adequately 
controlled with antiepileptic medications. The applicant further stated 
that, the RNS[supreg] System is the first closed-loop, responsive 
system to treat partial onset seizures. Responsive electrical 
stimulation is delivered directly to the seizure focus in the brain 
when abnormal brain activity is detected. A cranially implanted 
programmable neurostimulator senses and records brain activity through 
one or two electrode-containing leads that are placed at the patient's 
seizure focus/foci. The neurostimulator detects electrographic patterns 
previously identified by the physician as abnormal, and then provides 
brief pulses of electrical stimulation through the leads to interrupt 
those patterns. Stimulation is delivered only when abnormal 
electrocorticographic activity is detected. The typical patient is 
treated with a total of 5 minutes of stimulation a day. The RNS[supreg] 
System incorporates remote monitoring, which allows patients to share 
information with their physicians remotely.
    With respect to the newness criterion, the applicant stated that 
some patients diagnosed with partial onset seizures that cannot be 
controlled with antiepileptic medications may be candidates for the 
vagus nerve stimulator (VNS) or for surgical removal of the seizure 
focus. According to the applicant, these treatments are not appropriate 
for, or helpful to, all patients. Therefore, the applicant believed 
that there is an unmet clinical need for additional therapies for 
partial onset seizures. The applicant further stated that the 
RNS[supreg] System addresses this unmet clinical need by providing a 
novel treatment option for treating persons diagnosed with medically 
intractable partial onset seizures. The applicant received FDA 
premarket approval on November 14, 2013.
    After evaluation of the newness, costs, and substantial clinical 
improvement criteria for new technology payments for the RNS[supreg] 
System and consideration of the public comments we received in response 
to the FY 2015 IPPS/LTCH PPS proposed rule, we approved the RNS[supreg] 
System for new technology add-on payments for FY 2015 (79 FR 49950). 
Cases involving the RNS[supreg] System that are eligible for new 
technology add-on payments are currently identified using the following 
ICD-9-CM procedure codes: 01.20 (Cranial implantation or replacement of 
neurostimulator pulse

[[Page 24428]]

generator) in combination with 02.93 (Implantation or replacement of 
intracranial neurostimulator lead(s)). According to the applicant, 
cases using the RNS[supreg] System would incur an anticipated cost per 
case of $36,950. Under Sec.  412.88(a)(2) of the regulations, new 
technology add-on payments are limited to the lesser of 50 percent of 
the average costs of the device or 50 percent of the costs in excess of 
the MS-DRG payment rate for the case. As a result, the maximum new 
technology add-on payment for cases involving the RNS[supreg] System is 
$18,475.
    With regard to the newness criterion for the RNS[supreg] System, we 
considered the beginning of the newness period to commence when the 
RNS[supreg] System was approved by the FDA on November 14, 2013. 
Because the 3-year anniversary date of the entry of the RNS[supreg] 
System on the U.S. market will occur in FY 2017 (November 14, 2016), we 
are proposing to continue new technology add-on payments for this 
technology for FY 2016. We are inviting public comments on this 
proposal.
    Because we are adopting the ICD-10 coding system effective October 
1, 2015, as discussed in section II.G.1.a. of the preamble of this 
proposed rule, we are proposing to identify and make new technology 
add-on payments for cases involving the RNS[supreg] System using the 
following ICD-10-PCS procedure code combination: 0NH00NZ (Insertion of 
neurostimulator generator into skull, open approach) in combination 
with 00H00MZ (Insertion of neurostimulator lead into brain, open 
approach). The maximum payment for a case involving the RNS[supreg] 
System would remain at $18,475 for FY 2016. We are inviting public 
comments on this proposal.
5. FY 2016 Applications for New Technology Add-On Payments
    We received applications for nine new technology add-on payments 
for FY 2016. In accordance with the regulations under Sec.  412.87(c), 
applicants for new technology add-on payments must have FDA approval by 
July 1 of each year prior to the beginning of the fiscal year that the 
application is being considered. A discussion of the applications is 
presented below.
a. Angel Medical Guardian[supreg] Ischemic Monitoring Device
    Angel Medical Systems, Inc. submitted an application for new 
technology add-on payments for the Angel Medical Guardian[supreg] 
Ischemic Monitoring Device (hereinafter referred to as the 
Guardian[supreg]). The Guardian[supreg] implantable ischemia detection 
system is designed to provide early detection and patient alerts for 
ischemic and other cardiac events experienced by ambulatory patients. 
The device consists of an implantable monitoring device (IMD) that 
communicates with an external device (EXD) via telemetry. The IMD 
monitors the patient's current cardiac data and compares these data to 
the patient's historical baseline using thresholds that reflect the 
normal ischemic range for each individual. Upon detection of a cardiac 
anomaly, the implanted IMD vibrates and provides one of two 
distinguishable alerts, ``emergency alarms'' and ``see doctor alerts,'' 
which prompt the patient to initiate emergency and/or preventative 
actions. The system also includes a program that allows physicians to 
adjust the settings for event detection and subsequent alerts.
    With respect to the newness criterion, the applicant anticipates 
FDA premarket approval during June 2015. The Guardian[supreg] 
technology is a Class III device that has obtained an investigational 
device exemption (IDE) from the FDA under IDE number G060259. Effective 
October 1, 2006 (FY 2007), ICD-9-CM procedure codes 00.56 (Insertion or 
replacement of implantable pressure sensor (lead) for intracardiac 
hemodynamic monitoring) and 00.57 (Implantation or replacement of 
subcutaneous device for intracardiac hemodynamic monitoring) were 
created to describe specific types of cardiac procedures. There have 
been minor revisions to each of the procedure codes' title and 
description over the years to better differentiate procedures being 
performed with various technologies. As of October 1, 2011 (FY 2012), 
these codes distinguish procedures using the Guardian[supreg] 
technology from other similar procedures that use various technologies. 
The current ICD-9-CM procedure code titles are as follows: 00.56 
(Insertion or replacement of implantable pressure sensor with lead for 
intracardiac or great vessel hemodynamic monitoring), and 00.57 
(Implantation or replacement of subcutaneous device for intracardiac or 
great vessel hemodynamic monitoring). As stated earlier in section 
II.G.1.a. of the preamble of this proposed rule, effective October 1, 
2015 (FY 2016), the ICD-10 coding system will be implemented. Under 
ICD-10, procedure code 02HK32Z (Insertion of monitoring device into 
right ventricle, percutaneous approach) is the comparable translation 
for ICD-9-CM procedure code 00.56, and procedure code 0JH602Z 
(Insertion of monitoring device into chest subcutaneous tissue and 
fascia, open approach) is the comparable translation for ICD-9-CM 
procedure code 00.57, which specifically describe procedures involving 
the Guardian[supreg] technology. We note that, in accordance with Sec.  
412.87(c), in order for a technology to be considered for new 
technology add-on payments for a particular fiscal year, the technology 
must be approved by the FDA by July 1 prior to the particular fiscal 
year for which add-on payments are requested. According to the 
applicant, there are no other treatment modalities that perform the 
same function as the Guardian[supreg] technology. Therefore, the 
applicant believed that the Guardian[supreg] technology is not 
substantially similar to any other currently approved technology. We 
are inviting public comments on whether the Guardian[supreg] technology 
meets the newness criterion.
    With respect to the cost criterion, the applicant determined that 
cases involving the Guardian[supreg] technology map to MS-DRG 264 
(Other Circulatory System O.R. Procedures). The applicant initially 
provided a sensitivity analysis performed using all of the cases 
assigned to MS-DRG 264, without isolating a subset of cases that would 
be eligible for treatment using the Guardian[supreg] technology. In 
follow up to our request for a more focused analysis that calculates an 
average case-weighted standardized charge per case for cases involving 
the Guardian[supreg] technology assigned to MS-DRG 264, the applicant 
submitted a revised analysis that used data from a subset of cases 
representing patients who received treatment involving the implantation 
of pacemakers that mapped to MS-DRG 243 (Pacemaker Implant with CC). 
The applicant searched the Healthcare Cost and Utilization Project 
(HCUP) database for patient profiles that indicated prior myocardial 
infarction with comorbidities such as malignant hypertension (reported 
using ICD-9-CM diagnosis code 401.0), other acute and subacute forms of 
ischemic disease (reported using ICD-9-CM diagnosis code 411.89), and 
intermediate coronary syndrome (that is, unstable angina reported using 
ICD-9-CM diagnosis code 411.1). According to the applicant, all of the 
patients enrolled in the ALERTS pivotal clinical study exhibited at 
least one or more of these comorbidities, similar to many of the 
patients represented by cases assigned to MS-DRG 243. The applicant 
asserted that the results from the revised search of the HCUP database 
revealed patient profiles that were similar to the patients who would 
have likely been recommended for treatment using the

[[Page 24429]]

Guardian[supreg] technology, which are represented by the cases 
assigned to MS-DRG 264. The applicant identified 843 cases assigned to 
MS-DRG 243, which represents patients treated with pacemaker 
implantations by the hospitals that participated in the 
Guardian[supreg] ALERTS clinical study.
    The applicant used data from multiple sources to compute an average 
case-weighted standardized charge per case for procedures involving the 
Guardian[supreg] technology. The applicant began by determining the 
specific FY 2015 Medicare IPPS Federal rate for cases assigned to MS-
DRG 243 that were treated by each hospital that participated in the 
Guardian[supreg] ALERTS clinical study. The applicant then adjusted 
this amount by a factor of 1.057, which was derived from the March 2014 
MedPAC Report to Congress on Medicare payment policies, to convert the 
Medicare payment to actual costs incurred by each hospital for each 
case. Specifically, the applicant determined this adjustment factor by 
subtracting the average industry wide margin of -5.4 percent, or -0.054 
percent, for hospitals during 2012, which was reflected in the March 
2014 Report to Congress, from a factor of 1, which results in the 
percentage of inpatient costs that Medicare paid (1-0.054 = 94.6), and 
then divided this amount by 100 (100/94.6 = 1.057). To convert the 
adjusted Medicare payment amount to charges, the applicant applied 
hospital-specific CCRs found in the FY 2015 IPPS final rule impact 
file. The applicant computed an average case-weighted standardized 
charge per case by weighting the number of implants performed using the 
Guardian[supreg] technology performed by each hospital participating in 
the Guardian[supreg] ALERTS clinical study to the overall number of 
implants performed and represented by cases assigned to MS-DRG 243. 
This resulted in an average case-weighted standardized charge per case 
of $75,010. The applicant then deducted device-related charges for a 
pacemaker based on data obtained from the FY 2015 After Outliers 
Removed (AOR) File to determine the nonimplant resources used during 
these types of procedures, and added the device-related charges for the 
Guardian[supreg] technology, which resulted in an adjusted average 
case-weighted charge per case of $89,050. Because this adjusted average 
case-weighted standardized charge per case exceeds the average case-
weighted threshold amount of $65,544 for MS-DRG 264 as displayed in 
Table 10 of the FY 2015 IPPS/LTCH PPS final rule, the applicant 
maintained that the Guardian[supreg] technology meets the cost 
criterion.
    We have several concerns regarding the applicant's cost analysis. 
We do not believe that it is appropriate to convert Medicare payments 
for discharges to actual costs incurred by hospitals by applying a 
margin adjustment factor and hospital-specific CCRs to determine an 
average case-weighted standardized charge for specific cases. According 
to the regulations under 42 CFR 412.2(b)(1), the prospective payment 
amount paid for inpatient hospital services is the total Medicare 
payment for the inpatient operating costs and the inpatient capital-
related costs incurred in furnishing services covered by the Medicare 
program. The prospective payment amount represents a payment amount for 
the total cost of inpatient hospital services incurred by hospitals 
participating in the Medicare program, but does not represent a measure 
of the actual costs per case. For example, two hospitals in the same 
CBSA will be paid the same prospective payment amount for a case 
assigned to the same MS-DRG. The fact that these hospitals are paid the 
same prospective payment amount does not imply that the hospitals 
incurred the same amount of costs per case. On the contrary, the 
hospitals probably incurred very different costs for each case and the 
prospective payment amount is simply a payment for the inpatient costs 
covered by Medicare. Therefore, we are concerned about the methodology 
used by the applicant to determine an average case-weighted 
standardized charge per case, and do not believe that the calculation 
of this amount determined by the applicant is accurate. Moreover, we 
are concerned that the applicant assumed that the patient profiles for 
patient treated with pacemaker implantations and patients treated using 
the Guardian[supreg] technology are similar enough to warrant the 
inclusion of cases assigned to MS-DRG 243 in the analysis and then to 
depend upon the results of that analysis as a basis to demonstrate that 
the technology meets the cost criterion. In addition, we do not believe 
that it is appropriate to assume that the resources used during 
procedures involving pacemaker implantations and procedures involving 
the Guardian[supreg] technology would be the same, and the applicant 
does not provide a rationale for assuming such similarities. Because of 
these concerns, we are unable to determine if the technology meets the 
cost criterion. We are inviting public comments on whether the 
Guardian[supreg] technology meets the cost criterion, particularly with 
respect to the concerns we have raised.
    With respect to the substantial clinical improvement criterion, the 
applicant asserted that this technology provides a more rapid 
beneficial resolution to ischemic and other cardiac events in 
ambulatory patients that reduces mortality and morbidity, and 
facilitates a faster patient presentation time to initiate treatment 
for these types of disorders. The applicant also believed that this 
technology fulfills an unmet clinical need for early diagnoses and 
preventative treatment options for a patient population that 
experiences silent, asymptomatic ischemia. The applicant included data 
from its pivotal ALERTS clinical trial, a randomized study expanding 
over a 6-month period of patients who were treated using the 
Guardian[supreg] technology and with the alarm function turned on 
(which represented the treatment group) or the alarm function turned 
off (which represented the control group). The primary efficacy 
endpoint was a composite variable that considered cardiac or 
unexplained death, new death Q-wave MI, or delayed presentation (time 
to door >2 hours) for a documented coronary occlusion event. The 
primary safety outcome measure was device-related complications. 
According to the applicant, the following findings demonstrate that the 
Guardian[supreg] technology represents a substantial clinical 
improvement in regard to currently available treatment options for 
Medicare beneficiaries:
     The treatment group showed statistically significant 
clinical improvement over the control group using a composite outcome 
variable;
     97 percent of patients treated with implantations using 
the Guardian[supreg] technology were free from system-related 
complications at 6 months post programming;
     A reduced proportion of patients having pre-hospital 
delays over 2 hours for a confirmed thrombotic coronary occlusive 
event;
     A reduction in the median time-to-door for patients 
treated using the Guardian[supreg] technology alert system turned on 
(51 minutes) versus patients treated using the Guardian[supreg] 
technology alert system turned off (1,808 minutes); and
     An improvement in the overall quality of life, and greater 
control over the condition, including feeling safer, for patients who 
were enrolled in the ALERTS trial and participated in a 2012 quality of 
life study that were treated with the Guardian[supreg] technology when 
the alarm system was activated.

[[Page 24430]]

    We are concerned that the outcome measures, including the quality 
of life measures, are based on and reflective of factors other than the 
efficacy of the device. For instance, any benefit from using the 
Guardian[supreg] technology depends entirely upon the patient heeding 
the alarms and alerts and seeking emergency medical care without delay. 
Moreover, we are concerned that the ALERTS pivotal trial uses 
inherently different methods of ascertainment of ``delayed 
presentation'' for the treatment group and the control group after an 
ischemic event, which implies a serious bias in regard to the clinical 
trial results. We believe that this bias questions the validity of the 
primary efficacy endpoint. An additional concern is that the ALERTS 
pivotal trial uses a very broad definition of a ``confirmed thrombotic 
event.'' Although the pivotal trial used four different criteria to 
determine whether such an event occurred, only two of them are actually 
evidence of an acute coronary event for which timely patient 
presentation for medical care might improve outcomes. The applicant did 
indicate how many confirmed events met each of the four criteria.
    We are inviting public comments on if, and how, the 
Guardian[supreg] technology meets the substantial clinical improvement 
criterion, particularly with respect to the concerns we have raised.
    Below we summarize and respond to the comments submitted on the 
Guardian[supreg] technology at the Town Hall meeting.
    Comment: Several participants in the ALERTS clinical trial 
submitted comments supporting the approval of new technology add-on 
payments for the Guardian[supreg] technology. According to the 
commenters, use of the Guardian[supreg] technology is associated with 
substantial clinical improvement of patients at high risk for a repeat 
myocardial infarction. The commenters stated that experiences as part 
of the ALERTS study have been positive. In addition, the commenters 
agreed with the applicant that patients implanted with an active 
Guardian[supreg] device who were alerted to a confirmed myocardial 
infarction event arrived at a medical facility significantly faster 
than those generally treated using the regular standard of care. 
Moreover, the commenters agreed with the applicant that patients are 
reassured by the effectiveness of the Guardian[supreg] device as a 
means of monitoring and protection. The commenters believed that the 
Guardian[supreg] device provides patients and providers with an 
important tool for helping to recognize when a significant ischemic 
event occurs and when to seek prompt medical treatment, which result in 
reduced morbidity and mortality, fewer visits to the emergency room and 
unnecessary hospitalizations, and reduced health care expenditures. The 
commenters believed that the Guardian[supreg] device meets the 
substantial clinical improvement criterion because the device offers a 
more rapid and beneficial resolution for treating patients by its 
capability to diagnose a medical condition in a patient population 
where the condition is currently undetectable as well as offers a 
treatment option to a patient population unresponsive to currently 
available treatments.
    One commenter, a principal investigator in the ALERTS study, 
further reported that treatment using the Guardian[supreg] device 
tended to reduce the incidence of Q waves, a primary clinical endpoint 
that has important ramifications in both morbidity and mortality rates. 
The commenter also noted that, based on the results of the ALERTS 
study, asymptomatic thrombotic events were recognized in 21 of 451 (4.6 
percent) of patients in the Guardian[supreg] treatment arm, and that 
the vast majority of these patients arrived to a medical facility 
within an hour of the onset of the event. In contrast, patients in the 
control arm who experienced asymptomatic ischemic events recorded by 
the Guardian[supreg] device arrived to a medical facility between 10 
and 77 days after the event. According to the commenter, many of these 
patients experienced a silent myocardial infarction, which occurs over 
time in a significant number of patients and can lead to higher 
mortality rates. The commenter believed that the Guardian[supreg] 
device provides a significant benefit to a patient population that 
experiences asymptomatic ischemic events and does not receive any 
physical warnings of their condition, and who would otherwise not seek 
treatment for a longer period of time than what is recommended in the 
medical community, if treatment is sought at all.
    Another commenter provided additional information on the 
opportunity for improvement upon time to treatment for patients at high 
risk for a recurrent myocardial infarction, which would in turn lead to 
improved clinical outcomes, particularly for the patient population 
experiencing asymptomatic ischemia. According to the commenter, 
approximately 50 percent of patients experiencing myocardial infarction 
have no symptoms at all or symptoms that may not be recognized, and 
often do not receive any acute therapy to avert or mitigate the impact 
of the infarction. The commenter stated that the current standard of 
care requires patients to recognize symptoms of heart attack and seek 
medication immediately, and, for every 30 minute delay in treatment, 
there is an associated 8.5 percent increased risk of developing an 
ejection fraction of less than 30 percent, which is highly correlated 
with subsequent heart failure, and an associated 7.5 percent relative 
risk increase in 1 year mortality. Therefore, the commenter believed 
that the Guardian[supreg] device presents a significant opportunity to 
address improvement in the timing of treatment for patients at high 
risk for a recurrent myocardial infarction.
    Response: We appreciate the commenters' input. We will take these 
comments into consideration when deciding whether to approve new 
technology add-on payments for the Guardian[supreg] device.
b. Blinatumomab (BLINCYTOTM)
    Amgen, Inc. submitted an application for new technology add-on 
payments for Blinatumomab (BLINCYTOTM), a bi-specific T-cell 
engager (BiTE) used for the treatment of Philadelphia chromosome-
negative (Ph-) relapsed or refractory (R/R) B-cell precursor acute-
lymphoblastic leukemia (ALL), which is a rare aggressive cancer of the 
blood and bone marrow. Approximately 6,050 individuals are diagnosed 
with ALL in the United States each year, and approximately 2,400 
individuals, which represents 30 percent of all new cases, are adults. 
ALL occurs when there are malignant transformations of B-cell or T-cell 
progenitor cells, causing an accumulation of lymphoblasts in the blood, 
bone marrow, and occasionally throughout the body. As a bi-specific T-
cell engager, the BLINCYTOTM technology attaches to a 
molecule on the surface of the tumorous cell, as well as to a molecule 
on the surface of normal T-cells, bringing the two into closer 
proximity and allowing the normal T-cell to destroy the tumorous cell. 
Specifically, the BLINCYTOTM technology attaches to a cell 
identified as CD19, which is present on all of the cells of the 
malignant transformations that cause ALL and helps attract the cell 
into close proximity of the T-cell CD3 with the intent of getting close 
enough to allow the T-cell to inject toxins that destroy the cancerous 
cell.
    BLINCYTOTM is administered as a continuous IV infusion 
delivered at a constant flow rate using an infusion pump. A single 
cycle of treatment consists of 28 days of continuous infusion, and each 
treatment cycle followed by 2 weeks without treatment prior to 
administering any further

[[Page 24431]]

treatments. A course of treatment consists of two phases. Phase 1 
consists of initial inductions or treatments intended to achieve 
remission followed by additional inductions and treatments to maintain 
consolidation; or treatments given after remission has been achieved to 
prolong the duration. During phase 1 of a single treatment course, up 
to two cycles of BLINCYTOTM are administered, and up to 
three additional cycles are administered during consolidation. The 
recommended dosage of BLINCYTOTM administered during the 
first cycle of treatment is 9 mcg per day for the first 7 days of 
treatment. The dosage is then increased to 28 mcg per day for 3 weeks 
until completion. During phase 2 of the treatment course, all 
subsequent doses are administered as 28 mcg per day throughout the 
entire duration of the 28-day treatment period.
    With respect to the newness criterion, the BLINCYTOTM 
technology received FDA approval on December 3, 2014, for the treatment 
of patients diagnosed with Ph- R/R B-cell precursor ALL, and the 
product gained entry onto the U.S. market on December 17, 2014. As 
stated in section II.G.1.a. of the preamble of this proposed rule, 
effective October 1, 2015 (FY 2016), the ICD-10 coding system will be 
implemented. We note that the applicant submitted a request for unique 
ICD-10-PCS codes that was presented at the March 18, 2015 ICD-10 
Coordination and Maintenance Committee meeting. If approved, the codes 
will be effective on October 1, 2015 (FY 2016). More information on 
this request can be found on the CMS Web site located at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html.
    According to the applicant, the BLINCYTOTM technology is 
the first, and the only, bi-specific CD19-directed CD3 T-cell engager 
single-agent immunotherapy approved by the FDA. However, we are 
concerned that BLINCYTOTM may be substantially similar to 
other bi-specific T-cell engagers. In the FY 2010 IPPS/RY 2010 LTCH PPS 
final rule (74 FR 43813 through 43814), we established criteria for 
evaluating whether a new technology is substantially similar to an 
existing technology, specifically: (1) Whether a product uses the same 
or a similar mechanism of action to achieve a therapeutic outcome; (2) 
whether a product is assigned to the same or a different MS-DRG; and 
(3) whether the new use of the technology involves the treatment of the 
same or similar type of disease and the same or similar patient 
population. If a technology meets all three of these criteria, it would 
be considered substantially similar to an existing technology and would 
not be considered ``new'' for purposes of new technology add-on 
payments. For a detailed discussion of the criteria for substantial 
similarity, we refer readers to the FY 2006 IPPS final rule (70 FR 
47351 through 47352), and the FY 2010 IPPS/LTCH PPS final rule (74 FR 
43813 through 43814).
    With regard to the first criterion, we are concerned that the 
mechanism of action of the BLINCYTOTM technology does not 
appear to differ from those of other bi-specific T-cell engagers, which 
also attract the cancerous cell within close proximity of a normal T-
cell with the intent of allowing the cell to get close enough to inject 
toxins to destroy the cancerous cell. There are several other BiTEs 
currently under investigation, including MT110 that are used for the 
treatment of patients diagnosed with gastrointestinal and lung cancers 
and are directed towards the EpCAM antigen, as well as MCSP-specific 
and CD33-specific BiTEs used for treating patients diagnosed with 
melanoma and acute myeloid leukemia, respectively. We believe that the 
feature that distinguishes the BLINCYTOTM technology from 
these other bi-specific T-cell engagers is that it specifically targets 
the CD19 cell. However, we are concerned that the specificity of the 
mechanism of action may not be sufficient to distinguish the 
BLINCYTOTM technology from other bi-specific T-cell engagers 
and, therefore, the technology bears substantial similarity to these 
other BiTEs used as current treatment options for Medicare 
beneficiaries. Further, we are concerned that determining that the 
BLINCYTOTM technology meets the newness criterion based on 
the specificity of the mechanism of action would set a precedent that a 
drug employing the same mechanism of action could be considered ``new'' 
based on such specificity when evaluated under the substantial 
similarity criterion.
    With respect to the second criterion, the applicant maintained that 
ICD-9-CM diagnosis codes 204.00 (Acute lymphoid leukemia, without 
mention of having achieved remission) and 204.02 (Acute lymphoid 
leukemia in relapse) are used to identify patients who may potentially 
be eligible for treatment using the BLINCYTOTM technology. 
Using these diagnosis codes, the applicant researched claims data from 
the FY 2013 MedPAR file and found cases across a wide spectrum of MS-
DRGs, not all of which are related to acute lymphoblastic leukemia. 
According to the applicant, 42.1 percent of all cases representing 
patients diagnosed with ALL were assigned to 238 MS-DRGs. Therefore, we 
believe that potential cases involving the BLINCYTOTM 
technology may be assigned to the same MS-DRG(s) as other cases 
involving bi-specific T-cell engagers used to treat patients with 
leukemia.
    With respect to the third criterion, according to the applicant, 
the standard treatment for patients diagnosed with ALL currently 
requires the use of multiple, intensive chemotherapy treatment drugs in 
combination to induce remission in order to allow the patient the 
opportunity to proceed to allogenic hematopoietic stem cell transplant 
(alloHSCT), which is the next stage in the course of treatment and the 
only known curative option. The applicant asserted that the 
BLINCYTOTM technology is not substantially similar to other 
treatment options because it does not involve the treatment of the 
same, or similar, type of diseases or the same, or similar, patient 
population. The commenter stated that, although chemotherapy is a 
successful treatment option to induce remission in patients diagnosed 
with R/R ALL, many of these patients relapse or stop responding to this 
standard treatment and, therefore, are be unable to proceed to 
alloHSCT, the next stage of treatment. Moreover, chemotherapy 
toxicities can be cumulative. Therefore, the commenter stated, patients 
who have received intensive treatments may not be eligible for further 
intensive chemotherapy treatments and, therefore, are unable to proceed 
to alloHSCT. The applicant asserted that the BLINCYTOTM 
technology is an anti-cancer immunotherapy that has shown to be 
effective in the treatment of a patient population in which 
chemotherapy has not been successful. Moreover, the applicant asserted 
that, as an anti-cancer immunotherapy, the BLINCYTOTM 
technology does not demonstrate the cumulative side-effects typically 
associated with chemotherapy treatments and, therefore, is a treatment 
option available to patients who are not eligible for further 
chemotherapy treatments based on the risks associated with cumulative 
toxicities. However, we are concerned that this specific patient 
population is not necessarily distinguishable from the overall patient 
population of individuals diagnosed with ALL, and we are unsure how to 
identify these patients using administrative claims data.
    We believe that the BLINCYTOTM technology may be similar 
to other approved technologies currently available to treat the same 
patient

[[Page 24432]]

population and medical disorders and, therefore, may not meet the 
newness criterion. In addition, we do not believe that the specific 
patient population targeted by the applicant is sufficiently 
distinguishable from the overall patient population that may be 
eligible for treatment using options that are currently available for 
these types of medical disorders. We are seeking public comments on if, 
and how, the BLINCYTOTM technology meets the newness 
criterion.
    With respect to the cost criterion, the applicant researched claims 
data in the FY 2013 MedPAR file, which contained inpatient hospital 
discharges from October 1, 2012, to September 30, 2013, and identified 
cases reporting ICD-9-CM diagnosis codes 204.00 (Acute lymphoid 
leukemia, without mention of having achieved remission) and 204.02 
(Acute lymphoid leukemia in relapse), which represent patients who may 
potentially be eligible for treatment using the BLINCYTOTM 
technology. The applicant found 2,649 cases across 246 MS-DRGs, 
including MS-DRGs 834 through 836 (Acute Leukemia without Major 
Operating Room Procedure, with MCC, with CC, and without CC/MCC, 
respectively) and MS-DRGs 837 through 839 (Chemotherapy with Acute 
Leukemia as Secondary Diagnosis, with MCC, with CC, and without CC/MCC, 
respectively), which represent approximately 48.1 percent of all cases 
with patients diagnosed with ALL. The applicant also found that MS-DRG 
809 (Major Hematological and Immunologic Diagnoses Except Sickle Cell 
Crisis and Coagulations Disorders with CC) and MS-DRG 871 (Septicema or 
Severe Sepsis without Mechanical Ventilation 96+ Hours with CC) 
contained cases that further represent 9.8 percent of all cases 
representing patients diagnosed with ALL. The cases assigned to the 
remaining 238 MS-DRGs represent a combined 42.1 percent of all cases 
representing patients diagnosed with ALL, with no single MS-DRG 
containing cases representing more than 2.0 percent of all cases 
representing patients diagnosed with ALL. The applicant also noted that 
when identifying cases that may be eligible for the 
BLINCYTOTM technology, it excluded any claims for discharges 
paid by Medicare Advantage plans, as well as any claims submitted by 
Medicare PPS-exempt cancer hospitals.
    Because the applicant was unable to provide a single estimate of 
the charges that would be avoided by using the BLINCYTOTM 
technology (that is, additional charges incurred during treatment using 
other technologies), the applicant conducted its own cost analysis 
using two scenarios for each group of MS-DRGs. The first scenario 
assumed that 50 percent of the charges for drugs would be eliminated by 
using the BLINCYTOTM technology, and the second scenario 
assumed that 75 percent of the charges for drugs would be eliminated. 
The applicant further conducted sensitivity analyses for each of the 
top eight MS-DRGs containing cases eligible for the 
BLINCYTOTM technology, as well as a sensitivity analysis for 
all of the other MS-DRGs outside of the top eight to which eligible 
cases mapped. The applicant then examined the average case-weighted 
standardized charge per case and the average case-weighted threshold 
amount for all 2,649 cases identified during FY 2013 across all 246 MS-
DRGs, and for 1,533 cases during FY 2013 across the top 8 MS-DRGs to 
demonstrate that the technology meets the cost criterion.
    Under the analysis' first scenario, 50 percent of the charges for 
drugs incurred by using other technologies were removed in order to 
exclude the charges associated with the use of these technologies. The 
applicant determined an average case-weighted threshold amount of 
$60,278 for the 2,649 ALL cases in the 246 MS-DRGs identified using the 
thresholds in Table 10 in the FY 2015 IPPS/LTCH PPS final rule. The 
applicant also determined an average case-weighted standardized charge 
per case of $245,006, or $184,728 above the average case-weighted 
threshold amount. For the subset of 1,533 cases that mapped to the top 
8 MS-DRGs, the applicant determined an average case-weighted threshold 
amount of $65,478 using the threshold in Table 10 in the FY 2015 IPPS/
LTCH PPS final rule. The applicant also determined an average case-
weighted standardized charge per case of $249,354, or $183,876 above 
the average case-weighted threshold amount. Based on the applicant's 
analyses, we believe that the BLINCYTOTM technology meets 
the cost criterion under the first scenario.
    Under the second scenario, the applicant removed 75 percent of 
charges for drugs incurred by using other technologies in order to 
exclude the charges associated with the use of these technologies. The 
applicant determined an average case-weighted threshold amount of 
$60,278 for the 246 MS-DRGs identified using the thresholds from Table 
10 in the FY 2015 IPPS/LTCH PPS final rule. The applicant determined an 
average case-weighted standardized charge per case of $239,321, or 
$179,043 above the average case-weighted threshold amount. For the 
subset of 1,533 cases that mapped to the top 8 MS-DRGs, the applicant 
determined an average case-weighted threshold amount of $65,478 using 
the thresholds from Table 10 in the FY 2015 IPPS/LTCH PPS final rule. 
The applicant determined an average case-weighted standardized charge 
per case of $242,423, or $176,945 above the average case-weighted 
threshold amount. Based on the applicant's analyses, we believe that 
the BLINCYTOTM meets the cost criterion under the second 
scenario.
    In conducting the above analyses, the applicant summarized the 
charges from the claims it identified and standardized the charges 
using an unspecified data source. The applicant then inflated all 
charges from FY 2013 to FY 2015 using the 10.4427 percent inflation 
factor used by CMS to update the FY 2015 outlier threshold. In 
determining the costs for the technology per case, the applicant also 
assumed that the BLINCYTOTM technology would be administered 
for 28 days during each inpatient stay. The applicant also assumed a 
hospital markup of 2.0 percent, and applied this amount to its 
estimated charges per case.
    We have three concerns regarding the applicant's methodology and 
assumptions used in its cost analyses. We are concerned that the 
applicant did not specify whether it used the FY 2015 IPPS final rule 
impact file or another data source to standardize the charges per case 
for this technology. We also are concerned that the applicant did not 
provide a basis for the hospital markup assumed when conducting its 
cost analyses. Unless the applicant provides this information, we are 
unable to determine whether the cost of the technology per case has 
been calculated appropriately. Moreover, we are concerned that 
including charges representative of a full 28-day treatment cycle is 
not appropriate for the purpose of calculating the charges associated 
with the BLINCYTOTM technology in order to determine whether 
the technology meets the cost criterion. According to the applicant, 
clinical trial data demonstrate that there are large subsets of 
patients who require inpatient care for the full 28-day treatment cycle 
because of the extreme clinical conditions relating to patients 
diagnosed with ALL. However, the applicant also conceded that only 25 
percent of patients enrolled in the U.S. clinical trial were 
hospitalized for the full 28-day treatment cycle, and only 38 percent 
of these patients were over the age of 65. This causes us concern 
regarding whether the methodology used by the applicant in its cost 
analysis is appropriate. We are inviting public comments on if, and 
how, the

[[Page 24433]]

BLINCYTOTM technology meets the cost criterion, specifically 
in regard to our concerns related to the applicant's methodology.
    With respect to the substantial clinical improvement criterion, the 
applicant asserted that the BLINCYTOTM technology represents 
a substantial clinical improvement for the treatment of patients 
diagnosed with R/R ALL because it offers a treatment option for 
patients who may be unresponsive to currently available options for 
treatment, decreases the rate of subsequent therapeutic interventions 
for patients who might not have otherwise achieved remission, and 
reduces mortality. The applicant provided data analysis results from 
four sources to demonstrate that the technology represents a 
substantial clinical improvement. These sources include a historical 
literature search, a model-based meta-analysis (Study 118427), a 
historical comparator data (Study 20120310), and a pivotal clinical 
trial (Study MT 103-211). We summarize the results from each of these 
sources below.
     The historical literature search revealed that superior 
regimens among currently used chemotherapeutic options result in a 
complete remission rate ranging from 18.0 percent to 38.6 percent, a 
median overall survival rate for patients experiencing early first 
relapse (<12 months) at 4.7 months, and a median overall survival rate 
for patients experiencing second or later relapse at 3 months. However, 
there are several limitations to using recent literature as a 
historical comparison for studies relating to patients diagnosed with 
R/R ALL, including differences in patient populations or study design 
characteristics across published studies, which make it difficult to 
formulate absolute comparisons with regard to data obtained from the 
BLINCYTOTM pivotal clinical trial. Therefore, the applicant 
conducted a model-based meta analysis (Studies 118427 and 119384), and 
a historical comparator study (Study 20120310) to account for these 
differences.
     In the model-based meta analysis (MBMA), the endpoints of 
complete remission (CR), duration of complete remission (DCR), and 
overall survival (OS) rate models were used to predict the efficacy of 
the BLINCYTOTM technology in cases representing patients 
diagnosed with relapsed/refractory ALL relative to patients treated 
using existing therapies. Simulations based on the MBMA for adult 
patients diagnosed with relapsed/refractory B-precursor ALL projected a 
poor outcome with existing salvage therapies, and a significant 
increase in the proportion of CR, DCR, and OS rates in a population 
with the same summary prognostic factors as those enrolled in the 
BLINCYTOTM study MT103-211. For adult patients diagnosed 
with relapsed/refractory ALL who were treated with existing salvage 
therapies and having the same summary prognostic factors as those 
enrolled in the BLINCYTOTM study MT 103-211, the projected 
proportion of CR was 0.121 (95 percent CI: 0.041 to 0.341), the median 
DCR rate was 4.9 months (95 percent CI: 2.5 to 9.2 months), and the 
median OS rate was 3.9 months (95 percent CI: 3.0 to 4.7 months). For 
adult patients diagnosed with R/R ALL having the same summary 
prognostic factors as those enrolled in the BLINCYTOTM study 
MT 103-211, treatment using the BLINCYTOTM technology when 
compared with existing salvage therapies is expected to have an odds 
ratio for proportion of CR of 3.50 (95 percent CI: 1.63 to 8.40), a 
hazard ratio for DCR of 0.53 (95 percent CI: 0.30 to 0.89), and a 
hazard ratio for OS of 0.60 (95 percent CI: 0.47 to 0.76). The 
applicant maintained that these results suggest that the 
BLINCYTOTM technology is associated with a reduced mortality 
rate and improved clinical outcomes when compared to standard 
chemotherapy treatment options.
     A historical comparator study was also conducted to obtain 
patient-level data for standard of care treatment options for patients 
experiencing early first relapse, refractory relapse after HSCT, and 
second or greater relapse in the same patient population as targeted in 
the BLINCYTOTM pivotal clinical trial. Study 20120310 was a 
retrospective pooled analysis of historical data available from 1990 to 
2014 on hematological remission and survival rates among patients 
diagnosed with Ph- R/R B-cell precursor ALL who were treated with 
standard of care therapies. The primary study endpoint was CR following 
relapse or salvage treatment; and secondary endpoints included 
estimates of OS rates, RFS rates, and the proportion of patients 
receiving alloHSCT. The weighted median OS rate for 1,112 patients 
based on available data was 3.3 months (95 percent CI: 2.8 to 3.6 
months) and was calculated from the start of the last salvage treatment 
or the first relapse (if start of the last salvage date was 
unavailable) until the time of death. The weighted OS rate at 6 and 12 
months was 30 percent (95 percent CI: 27 percent to 34 percent) and 15 
percent (95 percent CI: 13 percent to 18 percent), respectively. Among 
the patients who achieved CR based on available data (108 patients), 
the weighted median RFS rate was 5.0 months (95 percent CI: 1.2 to 6.6 
months). Among the 808 patients who received alloHSCT after salvage 
therapy based on available data, 18 percent (95 percent CI: 15 percent 
to 21 percent) received alloHSCT following the last line of salvage 
therapy, and among patients who achieved CR, 7 percent (95 percent CI: 
5 percent to 9 percent) received alloHSCT. The applicant maintained 
that these results highlight the poor health care outcomes for patients 
treated with standard chemotherapy and that BLINCYTOTM 
represents a significant improvement.
     BLINCYTOTM study MT 103-211 is a pivotal 
clinical study providing efficacy data for the BLINCYTOTM 
technology used for the treatment of adult patients diagnosed with Ph- 
R/R B-cell precursor ALL. It is a phase 2, single-arm study that 
included a particularly difficult patient population to treat 
consisting of patients diagnosed with Ph- B-cell precursor ALL who 
experienced either: (1) R/R after remission during 12 months or less of 
the first salvage treatment; (2) R/R after the first salvage treatment; 
or (3) R/R within 12 months after receiving alloHSCT. The primary 
endpoint was the rate of CR plus CRh within the first 2 cycles of 
treatment using the BLINCYTOTM technology. The key secondary 
endpoints include best overall response within 2 cycles of treatment 
using the BLINCYTOTM technology, RFS, time of hematological 
relapse, OS rates, and the proportion of patients eligible for alloHSCT 
who underwent the procedure after receiving treatment using the 
BLINCYTOTM technology. An analysis of data from the pivotal 
trial showed that 40 percent of patients treated with the 
BLINCYTOTM technology who achieved CR or CRh were able to 
proceed to alloHSCT. A secondary analysis from the pivotal study found 
that in patients who achieved CR or CRh and had a minimal residual 
disease assessment during the first 2 cycles, the MRD response rate 
(little or no evidence of disease even at the molecular level) was 82.2 
percent. The applicant asserted that this finding is significant 
because MRD is often a harbinger of relapse and a poor prognostic 
factor for patients diagnosed with ALL.
    We are concerned that the data provided from the clinical studies 
are not sufficient to demonstrate that the BLINCYTOTM 
technology meets the substantial clinical improvement criterion. For 
example, the BLINCYTOTM study MT 103-211 was

[[Page 24434]]

not randomized or blinded, and was comprised of a small sample group of 
189 patients with a median age of 39 years. We are concerned that the 
sample group studied during the clinical trial is not appropriate to 
determine if the technology represents a substantial clinical 
improvement in treatment options available for the Medicare patient 
population. Moreover, we are concerned that meaningful conclusions 
cannot be drawn from the results of this study because of the lack of a 
control group.
    With regard to the applicant's assertion that the 
BLINCYTOTM technology offers a treatment option for patients 
who may be unresponsive to currently available treatment modalities, 
the applicant specifically focused on how the BLINCYTOTM 
technology represents a treatment option for a patient population in 
which chemotherapy has proven to be unsuccessful, or for whom intensive 
chemotherapy treatment is not possible because of the risks associated 
with exposure to cumulative toxicities. The applicant believed that the 
MBMA, the historical comparator study, and the BLINCYTOTM 
study MT 103-211, which is a pivotal clinical trial sufficiently 
isolate this patient population in order to measure specific health 
care outcomes. We agree with this assertion. However, our concerns with 
the isolated patient population are that it is comprised of and 
represents a small sample group of patients whose age demographic is 
much younger than the age demographic of eligible Medicare 
beneficiaries.
    The applicant also asserted that the BLINCYTOTM 
technology decreases the rate of subsequent therapeutic interventions 
for patients who might not have otherwise achieved remission. In other 
words, because treatment with the BLINCYTOTM technology 
appears to increase the possibility of some patients achieving 
remission, the applicant maintained that these patients would receive 
fewer therapeutic interventions and become eligible to receive 
alloHSCT. We believe that it is difficult to determine what services 
and therapeutic interventions these patients would have required if 
they had not achieved remission, and we are not convinced that 
treatment using the BLINCYTOTM technology leads to a 
decrease in additional therapeutic interventions. We also note that 
patients who successfully achieve remission proceed to alloHSCT and, 
therefore, receive a different set of subsequent therapeutic 
interventions.
    With regard to the applicant's assertion that the 
BLINCYTOTM technology reduces mortality rates, we note that 
the applicant did not directly capture mortality rates as an endpoint 
in the BLINCYTOTM pivotal study (MT 103-211), although 
mortality was analyzed during the other three studies that support the 
new technology add-on payment application. We note that the data and 
the MBMA's results included with the technology's application used an 
OS odds ratio as a measure of mortality, and were developed from 18 
studies published between January 1995 and December 2012. We are 
concerned that relying on the results of data using a measure of 
mortality that is contingent upon studies completed in the 1990s 
presents a limitation in regard to the methodology used in the 
applicant's analysis. Advances in overall oncology care over the past 2 
decades may invalidate the patient population represented in these 
studies as a comparison group. Therefore, we find it difficult to 
attribute the reduced mortality rate and improved clinical outcomes 
revealed by these studies to the efficacy of the BLINCYTOTM 
technology.
    We are inviting public comments on if, and how, the 
BLINCYTOTM technology meets the substantial clinical 
improvement criterion, specifically in regard our specified concerns.
c. Ceftazidime Avibactam (AVYCAZ)
    Cerexa, Inc., an affiliate of Actavis, Inc., submitted an 
application for new technology add-on payments for FY 2016 for 
Ceftazidime Avibactam (AVYCAZ). AVYCAZ is used for the treatment of 
adult patients who have been diagnosed with complicated urinary tract 
Infections (cUTIs), including pyelonephritis and complicated Intra-
abdominal Infections (cIAIs), for which there are limited or no 
available treatment options. Although AVYCAZ is indicated for the 
treatment of patients who have been diagnosed with cUTIs and cIAIs, the 
applicant asserted that the product may also be used in the treatment 
of patients diagnosed with cUTIs and cIAIs caused by extended-spectrum 
[beta]-lactamase (ESBL)-producing Gram-negative pathogens, carbapenem-
resistant Enterobacteriaceae (CRE), and multidrug-resistant (MDR) 
Pseudomonas aeruginosa.
    AVYCAZ is an intravenous [beta]-lactam/[beta]-lactamase inhibitor 
combination antibacterial drug, consisting of an anti-pseudomonal, 
Cephalosporin (also referred to as Ceftazidime), and a [beta]-lactamase 
inhibitor, Avibactam. Ceftazidime is currently available and widely 
used as an extended spectrum of Cephalosporin. However, in recent years 
Cephalosporin has had diminishing effects because of increasing levels 
of antibiotic resistance in specific bacteria. Some species of bacteria 
produce [szlig]-lactamase enzymes, which cleave the [szlig]-lactam in 
antibiotics such as penicillin that have a [szlig]-lactam ring in their 
structure. The [szlig]-lactamase enzymes inactivate the antibiotic and 
cause the bacteria to become resistant to that antibiotic. To avoid 
development of resistance, in current practices [szlig]-lactamase 
inhibitors are administered in combination with [szlig]-lactam 
antibiotics to inhibit the action of [szlig]-lactamase enzymes and 
prevent the development of antibiotic resistance because [szlig]-
lactamase inhibitors block the activity of [szlig]-lactamase enzymes. 
This tends to widen the spectrum of antibacterial activity. For 
example, a commonly used [beta]-lactamase inhibitor, Clavulanic acid or 
Clavulanate, is usually combined with Amoxicillin to create Augmentin 
or Ticarcillin (Timentin); Sulbactam (also a commonly used [szlig]-
lactamase inhibitor) is usually combined with Ampicillin to create 
Cefoperazone; and Tazobactam is usually combined with Piperacillin.
    Ceftazidime is not combined with any [beta]-lactamase inhibitors. 
Combining Ceftazidime with Avibactam prohibits bacteria from developing 
resistance to the antibiotic and protects Ceftazidime from being 
inactivated by [beta]-lactamase enzymes. According to the applicant, 
unlike other inhibitors, Avibactam does not induce Class C enzymes that 
diminish the activity of Cephalosporin. Administering Ceftazidime in 
combination with Avibactam decreases the minimum inhibitory 
concentration (MIC) of Class A and Class C isolates, and some Class D 
isolates, thereby restoring the in vitro activity of Ceftazidime 
against these resistant isolates.
    AVYCAZ is administered as a treatment to patients 18 years of age, 
or older, who have been diagnosed with a cUTI and/or a cIAI in doses of 
2.5g (2g of Ceftazidime and 0.5g of Avibactam), every 8 hours by 
intravenous infusion spanning over a 2-hour time period. The 
recommended duration of treatment with AVYCAZ for patients diagnosed 
with a cIAI (used in combination with Metronidazole) is 5 to 14 days as 
an inpatient. The recommended duration of treatment with AVYCAZ for 
patients diagnosed with a cUTI is 7 to 14 days as an inpatient. The FDA 
has authorized a randomized multi-center, active-controlled trial to 
evaluate the safety and tolerability of AVYCAZ in children who are at 
least 3 months of age, and in adults 18 years of age or older who have 
been diagnosed with a cUTI and/or cIAI

[[Page 24435]]

as part of the post-marketing surveillance studies. The FDA also 
authorized and recommended a clinical trial to study the use of AVYCAZ 
in the treatment of patients who have been diagnosed with a cIAI and to 
generate phase 3 data as an effort to evaluate the pharmacokinetics, 
safety, and clinical outcomes of adult patients diagnosed with baseline 
renal impairment (creatinine clearance of 50 mL/min or less) who also 
are eligible for, or being treated with, AVYCAZ--adjusting dosage 
regimens to protect renal function.
    With regard to the newness criterion, AVYCAZ was approved by the 
FDA on February 25, 2015. As stated earlier in section II.G.1.a. of the 
preamble of this proposed rule, for FY 2016, effective October 1, 2015 
(FY 2016), the ICD-10 coding system will be implemented. We note that 
the applicant submitted a request and presented at the September 2014 
Coordination and Maintenance Committee Meeting to apply for ICD-10-PCS 
codes that uniquely identify the administration of Ceftazidime-
Avibactam Anti-infective. More information on this request can be found 
on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html.
    Currently, ICD-10-PCS procedure codes 3E03329 (Introduction of 
other anti-infective into peripheral vein, percutaneous approach) and 
3E04329 (Introduction of other anti-infective into central vein, 
percutaneous approach) describe the injection of an antibiotic. 
However, these ICD-10-PCS codes are not specific to the type of 
antibiotic used. We received public comments during and after the March 
2015 ICD-10 Coordination and Maintenance Committee meeting that 
supported the creation of a unique code to identify the AVYCAZ 
antibiotic when it is used in the treatment of patients who have been 
diagnosed with cUTIs and cIAIs. As a result, the following ICD-10-PCS 
codes were created under the new Section X to describe the specific use 
of AVYCAZ and are effective October 1, 2015 (FY 2016): XW03321 
(Introduction of ceftazidime-avibactam anti-infective into peripheral 
vein, percutaneous approach, new technology group 1); and XW04321 
(Introduction of ceftazidime-avibactam anti-infective into central 
vein, percutaneous approach, new technology group 1). If the AVYCAZ 
technology is approved for new technology add-on payments, we believe 
that the newness period would begin on February 25, 2015, the date of 
FDA approval. At this time, the applicant has not submitted any 
information that suggests the technology was not available on the U.S. 
market as of the FDA approval date. The applicant maintained that 
AVYCAZ meets the newness criterion. We are inviting public comments on 
whether AVYCAZ meets the newness criterion.
    According to the applicant, the most current guidelines recommend 
treatment for patients hospitalized because of a cUTI diagnosis using 
antibiotic drugs such as Cefepime, Ceftriaxone, and Piperacillin/
Tazobactam.\6\ For patients who have been diagnosed with a cIAI and who 
are advanced in age, the most current guidelines recommend treatment 
using antibiotic drugs such as Imipenemcilastin, Meropenem, and 
Piperacillin/Tazobactam.\7\ We are concerned that AVYCAZ may be 
substantially similar to other currently available treatment options, 
which also are used in the treatment of these types of infections. In 
the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 through 
43814), we established criteria for evaluating whether a new technology 
is substantially similar to an existing technology, specifically: (1) 
Whether a product uses the same or a similar mechanism of action to 
achieve a therapeutic outcome; (2) whether a product is assigned to the 
same or a different MS-DRG; and (3) whether the new use of the 
technology involves the treatment of the same or similar type of 
disease and the same or similar patient population. If a technology 
meets all three of these criteria, it would be considered substantially 
similar to an existing technology and would not be considered ``new'' 
for purposes of new technology add-on payments.
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    \6\ Drugs for urinary tract infections. JAMA. 2014;311(8):855-6. 
Available at: http://jama.jamanetwork.com/article.aspx?articleid=1832532.
    \7\ Solomkin JS et al. Guidelines by the Surgical Infection 
Society and the Infectious Diseases Society of America. Clin Infect 
Dis. 2010;50(2):133-64. Available at: http://cid.oxfordjournals.org/content/50/2/133.full.
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    As stated by the applicant, Ceftazidime is currently available and 
widely used in the treatment of these types of infections. In addition, 
the current treatment options available to Medicare beneficiaries and 
used to treat this patient population include antibiotics such as 
Polymyxins (for example, Colistin), Aminoglycosides (for example, 
Amikacin and Gentamicin), Carbapenems (for example, Meropenem and 
Imipenem/Cilastatin), or Tigecycline. The applicant maintained that the 
administration of Ceftazidime in combination with Avibactam broadens 
the spectrum of [szlig]-lactamase inhibition when compared to 
administering Ceftazidime without Avibactam and other currently 
available therapies because Avibactam has inhibiting agents that 
restore the in vitro activity of Ceftazidime that is sometimes 
decreased when encountered by common Class A and Class C isolates and 
some Class D isolates. The applicant also asserted that the technology 
may be used to treat patients who have been diagnosed with cUTIs and/or 
cIAIs caused by extended-spectrum [beta]-lactamase (ESBL)-producing 
Gram-negative pathogens, Klebsiella pneumoniae carbapenemase (KPC), 
carbapenem-resistant Enterobacteriaceae (CRE), and multidrug-resistant 
(MDR) Pseudomonas aeruginosa. However, we believe that the mechanism of 
action of AVYCAZ is the same as the mechanism of action of Ceftazidime 
because both drugs rely upon Cephalosporin to achieve a successful 
therapeutic outcome. Further, we are concerned that AVYCAZ involves the 
treatment of the same or similar type of disease and the same or 
similar patient population as other currently approved treatment 
options. Therefore, we believe that AVYCAZ bears a substantial 
similarity to Ceftazidime and other currently available treatment 
options. We are inviting public comments regarding whether AVYCAZ meets 
the newness criterion, specifically with regard to the substantial 
similarity criteria. For a detailed discussion of the criteria for 
substantial similarity, we refer readers to the FY 2006 IPPS final rule 
(70 FR 47351 through 47352) and the FY 2010 IPPS/LTCH PPS final rule 
(74 FR 43813 through 43814).
    With regard to the cost criterion, the applicant maintained that 
AVYCAZ meets the cost criterion. According to the applicant, there are 
63 ICD-9-CM diagnosis codes that describe cUTIs and/or cIAIs. Cases 
representing patients who have been diagnosed with cUTIs and/or cIAIs 
may be reported on hospital claims using any 1 of 12 different ICD-9-CM 
diagnosis codes describing cUTIs, and any 1 of 51 ICD-9-CM diagnosis 
codes describing cIAIs. Therefore, cases representing patients 
diagnosed with either a cUTI or a cIAI may be assigned to multiple MS-
DRGs. Of the 63 applicable ICD-9-CM diagnosis codes, the applicant used 
35 ICD-9-CM codes to identify 2,482,157 cases from the FY 2013 MedPAR 
file, which mapped to 567 MS-DRGs. The top five MS-DRGs containing 
cases that may be eligible for AVYCAZ are: MS-DRG 689 (Kidney and 
Urinary Tract Infections with MCC); MS-DRG 690 (Kidney and Urinary 
Tract Infections

[[Page 24436]]

without MCC); MS-DRG 871 (Septicemia or Severe Sepsis Without 
Mechanical Ventilation 96+ Hours With MCC); MS-DRG 872 (Septicemia or 
Severe Sepsis Without Mechanical Ventilation 96+ Hours Without MCC); 
and MS-DRG 945 (Rehabilitation with CC/MCC). The top five MS-DRGs 
represent approximately 30 percent of the cases identified (731,560 
cases out of 2,482,157 total cases), reported using 1 of the 35 
respective ICD-9-CM diagnosis codes. To demonstrate that AVYCAZ met the 
cost criterion, the applicant provided multiple analyses for both cUTI 
and cIAI cases using 100 percent or 80 percent of all of the cases, as 
well as analyses of subset cases treated with low-cost generic drugs 
and high-cost brand named drugs administered for a length of 5 and 8 
days.
    The applicant began its analysis by searching the FY 2013 MedPAR 
file and identifying 2,183,467 cases representing patients diagnosed 
with a cUTI across 544 MS-DRGs, and 298,690 cases representing patients 
diagnosed with a cIAI across 385 MS-DRGs. This resulted in the 
identification of 1,146,971 cases representing patients diagnosed with 
a cUTI across 205 MS-DRGs, and 39,080 cases representing patients 
diagnosed with a cIAI across 32 MS-DRGs. After searching the FY 2013 
IPPS Impact File, the applicant focused its analysis on 1,067,111 cases 
representing patients diagnosed with a cUTI across 193 MS-DRGs and 
36,181 cases representing patients diagnosed with a cIAI across 31 MS-
DRGs. The applicant further modified a portion of its analysis to focus 
on 1,067,072 cases representing patients diagnosed with a cUTI across 
192 MS-DRGs in accordance with the thresholds obtained from Table 10 of 
the FY 2015 IPPS/LTCH PPS final rule.
    Based on these data, for this analysis, the applicant used 100 
percent of all of the cases representing patients diagnosed with a cUTI 
(1,067,072 cases) across 192 MS-DRGs. The applicant determined an 
average case-weighted standardized charge per case of $42,736. The 
applicant then excluded the charges for the specific technology used 
from the average case-weighted standardized charge per case. To 
continue its analysis, the applicant used two different variables to 
exclude the charges for specific technologies used, that is, the 
charges for low-cost generic drugs and the charges for high-cost brand 
named drugs administered for a length of 5 and 8 treatment days. The 
applicant explained that, at a minimum, it is recommended that 
antibiotics be administered for at least 5 days to prevent the 
development of antibiotic-resistant bacteria.\8\ The applicant noted 
that, according to the Arlington Medical Resources (AMR),\9\ the 
average length of therapy for patients diagnosed with an UTI and/or an 
IAI who were successfully treated for less than 5 days only represents 
0.28 percent of all cases representing these types of conditions. 
Therefore, a 5-day treatment regimen was selected as a basis to 
represent the most conservative approach. In addition, the AMR's 
database indicated that the average length of therapy for patients 
diagnosed with an UTI who were successfully treated was 8.3 days and, 
therefore, the applicant selected a 8-day treatment regimen as a basis 
to represent a more liberal approach. The applicant also used data from 
the AMR to determine which drugs are the most commonly purchased 
injectable antibiotics. The applicant estimated a total charge of 
$441.75 for low-cost generic drugs and charges related to the infusion 
of these drugs for a 5-day treatment regimen, and $706.80 for a 8-day 
treatment regimen. The applicant estimated a total charge of $1,535.95 
for high-cost brand named drugs and charges related to the infusion of 
these drugs for a 5-day treatment regimen, and $2,397.58 for an 8-day 
treatment regimen. The applicant then standardized and inflated the 
charges using a factor of 7.13 percent using the Medicare Economic 
Index from the latest CMS Market Basket Data file.\10\ The applicant 
then added the charges for AVYCAZ and the infusion of AVYCAZ based on a 
5-day treatment regimen and an 8-day treatment regimen. Depending on 
the amount of charges excluded for the use of specific drugs and the 
charges related to the infusion of these drugs, the applicant 
determined a final inflated average case-weighted standardized charge 
per case that ranged from $42,469 to $46,842. Using the FY 2015 IPPS 
Table 10, the average case-weighted threshold amount for all of the MS-
DRGs used is $40,303 (all calculations above were performed using 
unrounded numbers). Because the final inflated average case-weighted 
standardized charge per case under all of these scenarios exceeds the 
average case-weighted threshold amount, the applicant maintained that 
AVYCAZ meets the cost criterion under this analysis.
---------------------------------------------------------------------------

    \8\ Antibiotics. Merck Manual. Available at: http://www.merckmanuals.com/home/infections/antibiotics.html.
    \9\ The AMR database is a U.S. hospital inpatient database that 
provides updated information every 6 months. AMR gathers data from 
approximately 300 hospitals per year, providing information from 
approximately 22,000 patient records. Pharmacists from these 
hospitals fill out an inpatient profile form by verbatim 
transcription of information from patient charts, such as patient 
demographics, surgery codes, antibiotics used, dosage, start and end 
dates for each antibiotic used, and specialty information. These 
inpatient profile forms are then submitted to AMR in paper format. 
Data from this sampling of hospitals is projected to the universe of 
US hospitals. Available at: http://www.amr-data.com/.
    \10\ Centers for Medicare and Medicaid Services. Market Basket 
Data. Available at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketData.html.
---------------------------------------------------------------------------

    The applicant conducted another analysis using the 80-percent 
variable for 846,897 cases representing patients diagnosed with a cUTI 
and/or a cIAI based on 3 of the ICD-9-CM diagnosis codes identified 
across 15 MS-DRGs. Depending on the amount of the charges excluded for 
the cost of the specific drugs and the charges related to the infusion 
of these drugs, the applicant determined a final inflated average case-
weighted standardized charge per case that ranged from $37,086 to 
$41,459. Using the FY 2015 IPPS Table 10, the average case-weighted 
threshold amount across the 15 MS-DRGs used is $36,411 (all 
calculations above were performed using unrounded numbers). Because the 
final inflated average case-weighted standardized charge per case under 
all of these scenarios exceeds the average case-weighted threshold 
amount, the applicant maintained that AVYCAZ also meets the cost 
criterion under this analysis.
    The applicant conducted another analysis using 100 percent of all 
of the cases representing patients who have been diagnosed with a cIAI 
(36,181 cases) across 31 MS-DRGs, and determined an average case-
weighted standardized charge per case of $51,436.98. The applicant then 
excluded the charges for the specific technology used from the average 
case-weighted standardized charge per case. To continue its analysis, 
the applicant used two different variables to exclude the charges for 
the specific technologies used; that is, the charges for low-cost 
generic drugs and the charges for high-cost brand named drugs 
administered for a length of 5 and 8 treatment days. The applicant 
explained that, at a minimum, it is recommended that antibiotics be 
administered for at least 5 days to prevent the development of 
antibiotic-resistant bacteria. The applicant also noted that, according 
to the AMR, the average length of therapy for patients diagnosed with 
an UTI and/or an IAI that was successfully treated in less than 5 days 
only represents 0.28 percent of all cases representing these types of 
conditions. Therefore, a 5-day treatment regimen was selected as a 
basis to represent the most conservative

[[Page 24437]]

approach. In addition, the AMR's database indicated that the length of 
therapy for patients diagnosed with an IAI was 11.2 days and, 
therefore, the applicant selected a 8-day regimen as a basis to 
represent a more liberal approach. The applicant then added charges for 
AVYCAZ and the infusion of AVYCAZ based on a 5-day or 8-day treatment 
regimen. Depending on the amount of the charges excluded for the 
specific drugs used and the charges related to the infusion of these 
drugs, the applicant determined a final inflated average case-weighted 
standardized charge per case that ranged from $58,565 to $62,937. Using 
the FY 2015 IPPS Table 10 thresholds, the average case-weighted 
threshold amount across all of the MS-DRGs used is $51,436 (all 
calculations above were performed using unrounded numbers). Because the 
final inflated average case-weighted standardized charge per case under 
all of these scenarios exceeds the average case-weighted threshold 
amount, the applicant maintained that AVYCAZ also meets the cost 
criterion under this analysis.
    The applicant conducted another analysis using the 80-percent 
variable for 28,483 cases representing patients diagnosed with a cIAI 
based on 5 of the ICD-9-CM diagnosis codes identified across 4 MS-DRGs. 
Depending on the amount of the charges excluded for the specific drugs 
used and the charges related to the infusion of these drugs, the 
applicant determined a final inflated average case-weighted 
standardized charge per case that ranged from $50,435.54 to $54,809.30. 
Using the FY 2015 IPPS Table 10 thresholds, the average case-weighted 
threshold amount across all of the MS-DRGs used is $47,186 (all 
calculations above were performed using unrounded numbers). Because the 
final inflated average case-weighted standardized charge per case under 
all of these scenarios exceeds the average case-weighted threshold 
amount, the applicant maintained that AVYCAZ also meets the cost 
criterion under this analysis.
    We are concerned that the applicant did not use the inflation 
factor of 10.4427 when calculating the average case-weighted 
standardized charge per case, which is the same inflation factor used 
by CMS to update the FY 2015 outlier threshold, and did not offer a 
rationale for its alternative inflation factor. We are inviting public 
comments on whether AVYCAZ meets the cost criterion, specifically with 
regard to our concerns.
    The applicant maintained that AVYCAZ represents a substantial 
clinical improvement in the available treatment options for patients 
diagnosed with a cIAI and/or a cUTI, including cUTIs and cIAIs that are 
known or suspected to be caused by extended-spectrum [beta]-lactamase 
(ESBL)-producing Gram-negative pathogens, carbapenem-resistant 
Enterobacteriaceae (CRE), and multidrug-resistant (MDR) Pseudomonas 
aeruginosa. According to the applicant, existing treatment options for 
these types of conditions are very limited and pose toxicity risks. The 
applicant stated that antibiotic-resistant infections are a serious 
problem for health care providers and patients. Among the bacteria 
resistant to all or nearly all of the antibiotics available today, CRE 
has developed rapidly and continues to proliferate. The applicant noted 
that, as of 2014, 49 States have reported confirmed CRE infections, an 
increase from 42 States that reported and confirmed CRE infections in 
2013.\11,12\ Almost half of hospital patients who get bloodstream 
infections from CRE bacteria die from the infection.\13\ The applicant 
further noted that, over the last 20 years, Gram-negative bacteria have 
evolved in defense against recently approved broad-spectrum [beta]-
lactam agents (for example, [szlig]-lactam [szlig]-lactamase inhibitors 
[BL-BLIs] and carbapenems) by producing a multitude of ``new'' [beta]-
lactamases--including extended-spectrum [beta]-lactamases (ESBLs) and 
carbapenemases that can confer resistance to these front-line agents. 
Because of the technology's inhibiting activity against these 
pathogens, the applicant maintained that AVYCAZ may provide a safer and 
more effective treatment option for patients diagnosed with cIAIs and 
cUTIs caused by these antibiotic-resistant organisms. The applicant 
further noted that there are serious side effects associated with the 
current treatment options and regimens, such as Polymyxins, Colistin, 
Aminoglycosides, Carbapenems, and Tigecycline,\14\ including resistance 
to nephrotoxicity.
---------------------------------------------------------------------------

    \11\ Tracking CRE--Carbapenempase producing CRE in the US. CDC 
HAI Web site. Available at: http://www.cdc.gov/hai/organisms/cre/TrackingCRE.html.
    \12\ Making health care safer--Stop infections from lethal CRE 
germs now. CDC Vital Signs 2013. Available at: http://www.cdc.gov/vitalsigns/pdf/2013-03-vitalsigns.pdf.
    \13\ Antobiotics. Merck Manual. Available at: http://www.merckmanuals.com/home/infections/antibiotics.html.
    \14\ Bader M, Hawboldt J, Brooks A. Management of complicated 
urinary tract infections in the era of antimicrobial resistance. 
Postgraduate Medicine.2010; 122(6):7-15.
    Rishi H, Dhillon P, Clark C. ESBLs: a clear and present danger? 
Critical Care Research and Practice, 2012; Article ID 625170.
    Jacoby GA, Munoz-Price LS. The New [beta]-Lactamases.N Engl J 
Med 2005; 352:380-391.
---------------------------------------------------------------------------

    The applicant provided data from the REPRISE study, which compared 
AVYCAZ and Carbapenem, also used as a treatment option for patients 
diagnosed with cIAIs and cUTIs. This study was specifically designed to 
demonstrate the inhibiting activity of Avibactam to restore the 
clinical and microbiological efficacy of Ceftazidime verses 
Ceftazidime-resistant, [beta]-lactamase-producing Gram-negative 
bacteria. According to the applicant, in the pooled cIAI and cUTI 
studies,\15\ the by-pathogen microbiological response rate was assessed 
using the test of cure (TOC) as a measuring tool. TOC refers to the 
reculturing of a site of initial infection to determine whether the 
patient is cured.\16\ TOC was the same or numerically higher for AVYCAZ 
versus the comparator for almost all pathogens isolated for the 
treatment of ceftazidime-nonsusceptible (CAZ-NS). We are concerned that 
the results of this study do not show that AVYCAZ has more favorable 
clinical or microbiological responses when compared to existing 
technologies. According to Sec.  412.87(b)(1) of our regulations, in 
order to satisfy the substantial clinical improvement criterion, the 
applicant must demonstrate that the technology represents an advance 
that substantially improves, relative to technologies previously 
available, the diagnosis or treatment of Medicare beneficiaries.
---------------------------------------------------------------------------

    \15\ Pooled data includes subset of patients from Phase II 
trials and interim data from the Phase III REPRISE trial.
    \16\ http://medical-dictionary.thefreedictionary.com/test+of+cure.
---------------------------------------------------------------------------

    The applicant reported that the INFORM study \17\ is one of the 
ongoing in vitro studies of AVYCAZ. According to the results of this 
study, Avibactam extends the activity of Ceftazidime and provides a 
broad spectrum of activity compared to currently available therapies. 
In addition, AVYCAZ demonstrated activity against two of the four areas 
of need as stated by the CDC, and potentially demonstrated activity 
against a third. The two areas of need that demonstrated favorable 
microbiological response were carbapenem-resistant Enterobacteriaceae 
(CRE) and extended-spectrum [beta]-lactamase (ESBL). We are concerned 
that in vitro studies may not necessarily correlate with clinical 
results.
---------------------------------------------------------------------------

    \17\ Data on File. Actavis 2014.
---------------------------------------------------------------------------

    The applicant also provided conclusions and data from one of the 
Phase II clinical trials conducted for patients diagnosed with cIAIs 
and cUTIs, respectively. The applicant reported that the patients 
diagnosed

[[Page 24438]]

with cIAIs were randomized to either AVYCAZ with Metronidazole versus 
the control drug Meropenem. The clinical cure rates at TOC were 82.4 
percent for the AVYCAZ + Metronidazole group, and 88.8 percent for the 
Meropenem group for patients diagnosed with cIAIs. For patients 
diagnosed with cUTIs, the applicant reported that they were randomized 
to either AVYCAZ versus Imipenem. The clinical cure rates at TOC were 
80.4 percent versus 73.5 percent for the AVYCAZ group versus the 
Imipenem group for patients diagnosed with cUTIs.
    The applicant also provided data from the RECLAIM-1 and RECLAIM-2 
trials. The applicant reported that these trials evaluated the safety 
and efficacy of AVYCAZ versus the control drug used to treat patients 
hospitalized for cIAIs. According to the applicant, AVYCAZ technology 
met the objective of statistical noninferiority when compared to the 
control drug. However, the applicant asserted, in a subgroup of 
patients diagnosed with moderate renal impairment at baseline (MRIB 
[defined as an estimated creatinine clearance (ClCr) of >30 mL/min and 
<=50 mL/min]), AVYCAZ combined with Metronidazole had lower clinical 
cure rates when compared to the control group. In addition to the 
clinical response rate findings, although the number of deaths was 
minimal, they were numerically higher for patients diagnosed with MRIB 
who were treated with AVYCAZ in combination with Metronidazole when 
compared to patients treated with Meropenem. The applicant acknowledged 
that this result was not more favorable and reviewed the individual 
cases of failure or indeterminate (including all deaths) for the 
patients diagnosed with MRIB, and identified no predominant reason for 
the treatment difference observed in the subgroup analysis. However, 
the applicant maintained that AVYCAZ represents a substantial clinical 
improvement because of the adverse effects of other currently available 
treatment options such as nephrotoxicity. We are concerned that the 
findings cited by the applicant lack data regarding the adverse effects 
of nephrotoxicity because of treatment using other currently available 
treatment options.
    The applicant stated that, in the Phase II trials, the Medicare-
eligible population represented 9.2 percent of the total population of 
patients diagnosed with cIAIs, and 14.8 percent of the total population 
of patients diagnosed with cUTIs. We are concerned that a cohort that 
would reflect a Medicare population was not analyzed or predefined as a 
subgroup in the trials to better understand and quantify the 
substantial clinical improvement of AVYCAZ. Furthermore, we are unsure 
whether a possibility of a favorable safety and tolerability profile 
for AVYCAZ relative to other currently available treatment options for 
patients diagnosed with cUTIs and cIAIs implies a substantial clinical 
improvement.
    The applicant maintained that AVYCAZ represents a substantial 
clinical improvement over treatment options currently available to 
Medicare beneficiaries. We do not believe that the applicant has 
substantiated this assertion. With regard to the data indicating the 
safety of the technology, we are concerned that the results for the 
trials could be interpreted to suggest that use of the technology may 
lead to increased mortality. We note that the composition of the 
treatment and control groups may make it difficult to isolate the 
degree to which AVYCAZ affects safety and health care outcomes because 
the patients in the treatment group were also treated with another drug 
administered in combination with AVYCAZ. Moreover, we are concerned 
that the median age of the participants enrolled in the studies of 
AVYCAZ was between 40 and 50 years. We believe that it would be 
indicative to use a subgroup that actually represents the eligible 
Medicare population (that is, patients who are 65 years of age or 
older, blind, disabled, or diagnosed with end-stage renal disease). The 
applicant stated that AVYCAZ had greater efficacy and safety measures 
for patients who have limited or no other available treatment options. 
However, we are concerned that the patient population enrolled in the 
applicant's trials were not eligible Medicare beneficiaries, nor was it 
definitive that these participants had limited or no other available 
treatment options. We are inviting public comments on whether AVYCAZ 
meets the substantial clinical improvement criterion, specifically with 
regard to our stated concerns.
    We did not receive any written public comments in response to the 
New Technology Town Hall meeting regarding the application of AVYCAZ 
for new technology add-on payments.
d. DIAMONDBACK 360[supreg] Coronary Orbital Atherectomy System
    Cardiovascular Systems, Inc. submitted an application for new 
technology add-on payments for the DIAMONDBACK 360[supreg] Coronary 
Orbital Atherectomy System (OAS) (DIAMONDBACK[supreg] Coronary OAS) for 
FY 2016. The DIAMONDBACK[supreg] Coronary OAS is a percutaneous orbital 
atherectomy system used to facilitate stent delivery in patients who 
have been diagnosed with coronary artery disease and severely calcified 
coronary artery lesions. The system uses an electrically driven, 
diamond-coated crown to reduce calcified lesions in coronary blood 
vessels. The components of the DIAMONDBACK[supreg] Coronary OAS are: 
(1) The DIAMONBACK 360[supreg] Coronary Orbital Atherectomy Device 
(OAD); (2) the VIPERWIRE Advance Coronary Guide Wire; (3) the 
VIPERSLIDE Lubricant; and (4) the Orbital Atherectomy System Pump. The 
DIAMONBACK 360[supreg] OAD is designed to track exclusively over the 
VIPERWIRE, which, in turn, uses the VIPERSLIDE Lubricant to reduce the 
friction between the drive shaft of the DIAMONBACK 360[supreg] OAD and 
the VIPERWIRE. The Orbital Atherectomy System Pump provides the saline 
pumping mechanism and power to the DIAMONBACK 360[supreg] OAD. All 
DIAMONDBACK[supreg] Coronary OAS devices are single use and provide 
sterile application, except for the pump.
    With respect to the newness criterion, the DIAMONDBACK[supreg] 
Coronary OAS received FDA pre-market approval as a Class III device on 
October 21, 2013. As stated in section II.G.1.a. of the preamble of 
this proposed rule, effective October 1, 2015 (FY 2016), the ICD-10 
coding system will be implemented. We note that the applicant submitted 
a request for a unique ICD-10-PCS code that was presented at the March 
18, 2015 ICD-10 Coordination and Maintenance Committee meeting. If 
approved, the code(s) will be effective on October 1, 2015 (FY 2016). 
More information on this request can be found on the CMS Web site at: 
http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html.
    According to the applicant, the DIAMONDBACK[supreg] Coronary OAS is 
the only atherectomy device that uses centrifugal force and orbital 
motion and, therefore, is not represented by the rotational, 
directional, or laser atherectomy device categories (as exemplified by 
Boston Scientific's Rotablator system, the SilverHawk/Covidient 
devices, and the Spectranetics ELCA Coronary Laser, respectively). In 
addition, the applicant asserted that the DIAMONDBACK[supreg] Coronary 
OAS is the first and only device approved for use in the United States 
as a treatment for patients who have been diagnosed with severely 
calcified coronary artery lesions to facilitate stent delivery and 
optimal deployment. Therefore, the applicant believed that the

[[Page 24439]]

DIAMONDBACK[supreg] Coronary OAS meets the newness criterion.
    We are concerned that, in addition to patients who have been 
diagnosed with severely calcified coronary artery lesions, the 
applicant also indicated that the DIAMONDBACK[supreg] Coronary OAS may 
be used in the treatment of patients who do not have severely calcified 
coronary artery lesions (for example, patients for whom the degree of 
calcification may not be severe) and that this technology may be 
substantially similar to the rotational, directional, and laser 
atherectomy devices that are already on the U.S. market for the 
treatment of such patients. In the FY 2010 IPPS/RY 2010 LTCH PPS final 
rule (74 FR 43813 through 43814), we established criteria for 
evaluating whether a new technology is substantially similar to an 
existing technology, specifically: (1) Whether a product uses the same 
or a similar mechanism of action to achieve a therapeutic outcome; (2) 
whether a product is assigned to the same or a different MS-DRG; and 
(3) whether the new use of the technology involves the treatment of the 
same or similar type of disease and the same or similar patient 
population. If a technology meets all three of these criteria, it would 
be considered substantially similar to an existing technology and would 
not be considered ``new'' for purposes of new technology add-on 
payments.
    With respect to the first criterion, the applicant maintained that 
the technology uses a differential sanding mechanism of action to 
remove plaque while potentially minimizing damage to the medial layer 
of the vessel. According to the applicant, this mechanism of action is 
the only one among atherectomy devices to use centrifugal force and 
orbital motion and, therefore, is not represented by the rotational, 
directional, or laser atherectomy device categories. We are concerned 
that the applicant did not include with their application data to show 
the effectiveness of the orbital mechanism of the DIAMONDBACK[supreg] 
Coronary OAS compared to the effectiveness of the rotational, 
directional, and laser mechanisms of similar devices used in treating 
patients with calcified coronary artery lesions. Therefore, we cannot 
determine if the device's mechanism of action is unique among 
atherectomy devices as the applicant claimed.
    With respect to the second criterion, the applicant determined that 
coronary atherectomy cases for which the DIAMONDBACK[supreg] Coronary 
OAS technology would be appropriate are assigned to MS-DRG 246 
(Percutaneous Cardiovascular Procedure with Drug-Eluting Stent with MCC 
or 4+ Vessels/Stents); MS-DRG 247 (Percutaneous Cardiovascular 
Procedure with Drug-Eluting Stent without MCC); MS-DRG 248 
(Percutaneous Cardiovascular Procedure with Non-Drug-Eluting Stent with 
MCC or 4+ Vessels/Stents); MS-DRG 249 (Percutaneous Cardiovascular 
Procedure with Non-Drug-Eluting Stent without MCC); MS-DRG 250 
(Percutaneous Cardiovascular Procedure without Coronary Artery Stent 
with MCC), and MS-DRG 251 (Percutaneous Cardiovascular Procedure 
without Coronary Artery Stent without MCC). We are concerned that 
potential cases involving the DIAMONDBACK[supreg] Coronary OAS would be 
assigned to the same MS-DRGs as other cases that use atherectomy 
devices currently available on the U.S. market.
    With respect to the third criterion, the applicant maintained that 
the DIAMONDBACK[supreg] Coronary OAS is the first and only device 
approved for use in the United States as a treatment for severely 
calcified coronary lesions. According to the applicant, advances in 
current stent technology have allowed most patients with coronary 
lesions to be treated effectively with relatively favorable long-term 
outcomes. However, there remain subsets of the patient population that 
are still challenging to treat, including patients with severe coronary 
calcification. According to the applicant, the DIAMONDBACK[supreg] 
Coronary OAS is the only atherectomy device currently available to 
treat this patient population because it is the first and only device 
approved for use in the United States for severely calcified coronary 
lesions. However, we are concerned that other devices currently 
available on the U.S. market may not necessarily be contraindicated for 
use in treating patients with severe coronary calcification. 
Specifically, we are not sure if patients with less than severe 
coronary calcification could be appropriately treated using the 
DIAMONDBACK[supreg] Coronary OAS or other atherectomy devices currently 
available on the U.S. market in order to determine if the 
DIAMONDBACK[supreg] Coronary OAS treats a different patient population 
as the applicant claimed.
    We are inviting public comments on if, and how, the 
DIAMONDBACK[supreg] Coronary OAS meets the newness criterion. In our 
subsequent discussion of the cost and substantial clinical improvement 
criteria, we limit our analysis of the new technology device to a 
patient population who has severely calcified coronary lesions for 
which the other devices are contraindicated for use.
    With respect to the cost criterion, the applicant determined that 
cases representing patients who have been treated with transluminal 
coronary atherectomy for which the DIAMONDBACK[supreg] Coronary OAS 
technology is appropriate map to MS-DRGs 246 through 251 as noted 
earlier in this section. The applicant searched the claims data in the 
FY 2013 MedPAR file for cases assigned to these six MS-DRGs (which 
contained claims for inpatient hospital discharges from October 1, 2012 
to September 30, 2013) and identified 5,443 claims for cases reporting 
ICD-9-CM procedure code 17.55. The applicant indicated that it further 
examined the claims data for the cases that also reported ICD-9-CM 
diagnosis code 414.4, and identified 250 claims for cases with a 
diagnosis of calcified coronary lesion. The applicant stated that it 
applied the standard trims used by CMS when selecting cases for IPPS 
rate calibration. Therefore, it included cases from IPPS hospitals, 
including hospitals located in Maryland, and excluded cases paid by 
Medicare Advantage plans, statistical outlier cases, and cases from 
hospitals that did not submit charges in a sufficiently broad range of 
revenue centers.
    The applicant reported that it conducted 16 sensitivity analyses 
based on four areas of uncertainty: Whether to include all coronary 
atherectomy cases in the analysis or only those cases that reported 
calcified coronary artery lesions; whether to consider a lower value or 
higher value as the acquisition cost of a typical atherectomy catheter; 
whether to use the full cost of the DIAMONDBACK[supreg] Coronary OAS 
catheter and materials or only the cost of the catheter alone; and 
whether to include or exclude a factor to inflate costs to FY 2015 
costs. Based on the result of the sensitivity analyses with all 16 
combinations of the values that the applicant performed, the applicant 
reported that it determined that the average case-weighted standardized 
charge per case for the DIAMONDBACK[supreg] Coronary OAS would exceed 
the average case-weighted threshold amounts for MS-DRGs 246 through 251 
in Table 10 of the FY 2015 IPPS/LTCH PPS final rule. According to the 
applicant, the average case-weighted standardized charge per case using 
the DIAMONDBACK[supreg] Coronary OAS device exceeds the average case-
weighted threshold amounts for MS-DRGs 246 through 251 in Table 10 by 
between approximately $6,000 to $15,000, depending on the results 
determined by using the combination of

[[Page 24440]]

values of the four areas of uncertainty. As described below, the 
applicant believed that using the scenario that produced the lowest 
difference between the average case-weighted standardized charge per 
case determined by the applicant's analyses and the average case-
weighted threshold amounts for MS-DRGs 246 through 251 from Table 10 in 
the FY 2015 IPPS/LTCH PPS final rule still exceeded the Table 10 
threshold amounts by $5,803.
    Using the scenario that produced the lowest difference between the 
average case-weighted standardized charge per case determined by the 
applicant and the average case-weighted threshold amount in the FY 2015 
IPPS/LTCH PPS final rule Table 10, the applicant included all cases 
reporting coronary atherectomy (specifically, the 5,443 cases reported 
with ICD-9-CM procedure code 17.55) in this analysis. The applicant 
removed the costs of the other specific technologies used during these 
procedures; that is, the applicant removed the higher of the two 
standard catheter costs, and added the full cost of the 
DIAMONDBACK[supreg] Coronary OAS catheter alone. To estimate the cost 
for the new technology, the applicant divided the projected cost per 
patient by the national average CCR for supplies (0.292) included in 
the FY 2015 IPPS/LTCH PPS final rule. This resulted in an average case-
weighted average standardized charge per case of $86,080. The applicant 
stated that it did not apply an inflation factor to convert the FY 2013 
costs to FY 2015 costs for this analysis. However, in other analyses, 
the applicant used the 2-year inflation factor of 10.44 percent taken 
from the FY 2015 IPPS/LTCH PPS final rule (79 FR 50379), which was the 
final inflation factor used in the CMS outlier threshold calculation 
for the applicable fiscal year. The applicant then determined that its 
average case-weighted standardized charge per case exceeded the average 
case-weighted threshold amounts for MS-DRGs 246 through 251 in Table 10 
of the FY 2015 IPPS/LTCH PPS final rule by $5,803. The applicant 
maintained that all of the results of the analyses using this 
methodology that were included in its application likewise exceeded the 
Table 10 threshold amounts for these MS-DRGs and, therefore, 
demonstrated that the DIAMONDBACK[supreg] Coronary OAS meets the cost 
criterion.
    Using the scenario that produced the lowest difference between its 
average case-weighted standardized charge per case and the average 
case-weighted threshold amounts for MS-DRGs 246 through 251 from the FY 
2015 Table 10 for the analysis of the subgroup of cases representing 
patients who have severely calcified coronary artery lesions, the 
applicant reported that it included all of the cases that report 
coronary atherectomy that also reported diagnosis of calcified coronary 
lesions (250 cases reporting ICD-9-CM procedure code 414.4). As in the 
previous scenario, the applicant removed costs of the other specific 
technologies used during these other procedures; that is, the applicant 
removed the higher of the two standard catheter costs, and added the 
full cost of the DIAMONDBACK[supreg] Coronary OAS catheter alone. To 
estimate the costs for the new technology, the applicant divided the 
projected cost per patient by the national average CCR for supplies 
(0.292) in the FY 2015 IPPS/LTCH PPS final rule. This resulted in an 
average case-weighted standardized charge per case of $86,779. The 
applicant did not apply an inflation factor to convert the FY 2013 
costs to FY 2015 costs for this analysis. The applicant then determined 
that the average case-weighted standardized charge per case exceeded 
the FY 2015 Table 10 threshold amount of $80,807 by $5,972. The 
applicant maintained that all of the results of the analyses using this 
methodology that were included in its application likewise exceeded the 
Table 10 threshold amounts for these MS-DRGs and, therefore, 
demonstrated that the DIAMONDBACK[supreg] Coronary OAS meets the cost 
criterion.
    We question some of the assumptions underlying the four areas of 
uncertainty that were the basis for the applicant's sensitivity 
analyses. We would like to know the basis of the higher value that the 
applicant considered to be a possible acquisition cost of a typical 
atherectomy catheter. We also are concerned that the applicant did not 
provide a basis for determining the two values it used to remove the 
costs associated with the other specific technologies that may have 
been used during the cases included in the analysis. We are inviting 
public comments on if, and how, the DIAMONDBACK[supreg] Coronary OAS 
meets the cost criterion.
    The applicant maintained that the DIAMONDBACK[supreg] Coronary OAS 
offers a treatment option for a patient population that has been 
diagnosed with severely calcified coronary arteries that are ineligible 
for currently available treatments and results in improved clinical 
outcomes for patients who have been diagnosed with complex coronary 
artery disease related to severely calcified coronary arteries. The 
applicant also stated that the DIAMONDBACK[supreg] Coronary OAS device 
significantly improves clinical outcomes for this patient population 
when compared to currently available treatment options, including 
reduced mortality, a reduced rate of device-related complications, a 
decreased rate of subsequent diagnostic or therapeutic interventions 
(for example, due to reduced rate of recurrence of the disease 
process), a decreased number of future hospitalizations or physician 
visits, more rapid beneficial resolution of the disease process 
treatment because of the use of the device, decreased pain, bleeding, 
or other quantifiable symptoms, and reduced recovery time.
    The applicant included data from its ORBIT II study to demonstrate 
that the technology represents substantial clinical improvement over 
currently available treatment options, including improvement in 
mortality rates, major adverse cardiac event (MACE) rates, 
revascularization rates, and cost savings. According to the applicant, 
its ORBIT II study was a pivotal clinical study to evaluate the safety 
and effectiveness of the DIAMONDBACK[supreg] Coronary OAS in treating a 
subset of patients who have severely calcified coronary artery lesions. 
The applicant explained that the ORBIT II study was a prospective, 
multicenter, non-blinded clinical trial that enrolled 443 consecutive 
patients who have been diagnosed with severely calcified coronary 
lesions at 49 U.S. sites from May 25, 2010 to November 26, 2012, in 
which the DIAMONDBACK[supreg] Coronary OAS was used to prepare patients 
who had severely calcified coronary lesions for stent placement. 
According to the applicant, the DIAMONDBACK[supreg] Coronary OAS 
produced clinical outcomes that exceeded its ORBIT II study's two 
primary safety and efficacy endpoints within a patient population. The 
primary safety endpoint was 89.6 percent freedom from 30-day MACE, 
compared with the performance goal of 83 percent. The primary efficacy 
endpoint (residual stenosis <50 percent post-stent without in-hospital 
MACE) was 88.9 percent, compared with the performance goal of 82 
percent. The applicant stated that, during the trial, stent delivery 
after use of the DIAMONDBACK[supreg] Coronary OAS occurred successfully 
in 97.7 percent of cases with <50 percent residual stenosis in 98.6 
percent of the patients in the study. The applicant further stated that 
low rates of in-hospital Q-wave MI, cardiac death, and target vessel 
revascularization also were reported. The applicant believed that the 
results of its ORBIT II study met both the primary safety and efficacy 
endpoints by significant margins and not only

[[Page 24441]]

helped to facilitate stent delivery, but also improved both acute care 
and 30-day clinical outcomes compared to historical controls.
    The applicant also compared the results of its ORBIT II study with 
historical study data that measured the performance of other coronary 
atherectomy devices used in the treatment of patients who have moderate 
to severely calcified coronary lesions. According to the applicant, the 
death and revascularization rates reported in the ORBIT II study were 
much lower than those rates reported in the literature for patients who 
had severely calcified coronary lesions. For example, inpatient cardiac 
death rates were reported on one reported study in the literature 
(Mosseri, et al.) as 1.6 percent and in another reported study (Abdel-
Wahab, et al.) as 1.7 percent, while another study report (Clavijo, et 
al.) reported death at 30 days as 2.6 percent and 1.5 percent for RA + 
DES and DES, respectively. 18 19 20 The applicant maintained 
that, compared to these historical study data, the data results of the 
ORBIT II study demonstrated much lower cardiac death rates of 0.2 
percent in-hospital and 0.2 percent at 30 days. The applicant further 
reported that the results of its ORBIT II study showed lower mortality 
rates at 9 months and 1 year (3 percent and 4.4 percent, respectively) 
compared to previously reported rates (5.0 percent and 5.85 percent at 
9 months and 6.3 percent at 1 year). The study report by Mosseri, et 
al. also reported a 1.6 percent in-hospital target lesion 
revascularization rate (TLR) in a patient population with more 
superficial calcification,\21\ whereas the study report by Clavijo, et 
al. reported a 1.3 percent 30-day TLR rate for the RA + DES group.\22\ 
In contrast, the applicant reported that the results of the ORBIT II 
study showed a lower TLR rate of 0.7 percent (both in-hospital and 30-
day), even though more patients who had severely calcified coronary 
lesions were included in the study, and the patients were older and had 
more comorbidities. The applicant stated that, at 1-year, the results 
of the ORBIT II study showed a higher freedom from TVR/TLR rate (94.1 
percent) compared to previously reported rates (81.7 percent to 91.3 
percent), even though patients who had more severely calcified coronary 
lesions were included in the ORBIT II study. According to the 
applicant, the MACE rate of 16.4 percent indicated in the results of 
the ORBIT II study was lower than the rate of the ROTAXUS (24.4 
percent) and ACUITY/HORIZONS (19.9 percent) trials despite the use of a 
less stringent standard of severe calcification in the latter 
studies.23 24 Further, the applicant reported that patients 
in the ORBIT II study experienced a lower rate of device-related 
complications (such as dissection, abrupt closure, and perforation) 
compared to rates in the historical studies. Overall, the applicant 
asserted that a comparison of data from the ORBIT II study and the data 
from historical studies demonstrates that patients in the ORBIT II 
study had more severe calcium coronary lesions and potentially were 
more difficult to treat, although they experienced better outcomes.
---------------------------------------------------------------------------

    \18\ Mosseri M, Satler LF, Pichard AD, Waksman R. Impact of 
vessel calcification on outcomes after coronary stenting. Cardiovasc 
Revascularization Med Mol Interv. 2005;6(4):147-153.
    \19\ Abdel-Wahab M, Richardt G, Joachim Buttner H, et al. High-
speed rotational atherectomy before paclitaxel-eluting stent 
implantation in complex calcified coronary lesions: the randomized 
ROTAXUS (Rotational Atherectomy Prior to Taxus Stent Treatment for 
Complex Native Coronary Artery Disease) trial. JACC Cardiovasc 
Interv. 2013;6(1):10-19.
    \20\ Clavijo LC, Steinberg DH, Torguson R, et al. Sirolimus-
eluting stents and calcified coronary lesions: clinical outcomes of 
patients treated with and without rotational atherectomy. Catheter 
Cardiovasc Interv Off J Soc Card Angiogr Interv. 2006;68(6):873-878.
    \21\ Mosseri M, Satler LF, Pichard AD, Waksman R. Impact of 
vessel calcification on outcomes after coronary stenting. Cardiovasc 
Revascularization Med Mol Interv. 2005;6(4):147-153.
    \22\ Clavijo LC, Steinberg DH, Torguson R, et al. Sirolimus-
eluting stents and calcified coronary lesions: clinical outcomes of 
patients treated with and without rotational atherectomy. Catheter 
Cardiovasc Interv Off J Soc Card Angiogr Interv. 2006;68(6):873-878.
    \23\ Genereux P, Madhavan MV, Mintz GS, et al. Ischemic outcomes 
after coronary intervention of calcified vessels in acute coronary 
syndromes. Pooled analysis from the HORIZONS-AMI (Harmonizing 
Outcomes With Revascularization and Stents in Acute Myocardial 
Infarction) and ACUITY (Acute Catheterization and Urgent 
Intervention Triage Strategy) TRIALS. J Am Coll Cardiol. 
2014;63(18):1845-1854.
    \24\ Abdel-Wahab M, Richardt G, Joachim Buttner H, et al. High-
speed rotational atherectomy before paclitaxel-eluting stent 
implantation in complex calcified coronary lesions: the randomized 
ROTAXUS (Rotational Atherectomy Prior to Taxus Stent Treatment for 
Complex Native Coronary Artery Disease) trial. JACC Cardiovasc 
Interv. 2013;6(1):10-19.
---------------------------------------------------------------------------

    We are concerned that the ORBIT II study conducted by the applicant 
lacked a control arm. The applicant asserted that although other FDA-
approved coronary atherectomy products are available, none of them are 
indicated for the treatment of patients who have severely calcified 
coronary arteries and, therefore, could not be used as a control. The 
applicant believed that it accounted for this study limitation by 
comparing the results of the ORBIT II study to historical control 
subjects documented in published reports. However, we continue to be 
concerned that meaningful conclusions cannot be drawn from a study that 
did not include a comparator group. Moreover, we question the 
reliability of comparing data from the ORBIT II study to historical 
study data because different definitions of severe calcification used 
in each study can make absolute comparisons difficult and/or invalid. 
We are inviting public comments on if, and how, DIAMONDBACK[supreg] 
Coronary OAS meets the substantial clinical improvement criterion.
e. CRESEMBA[supreg] (Isavuconazonium)
    Astellas Pharma US, Inc. (Astellas) submitted an application for 
new technology add-on payments for CRESEMBA[supreg] (isavuconazonium) 
for FY 2016. CRESEMBA[supreg] is an intravenous and oral broad-spectrum 
antifungal used for the treatment of adults who have severe invasive 
and life-threatening fungal infections, including invasive 
aspergillosis and mucormycosis (zygomycosis).
    CRESEMBA[supreg] received FDA approval on March 6, 2015 and 
anticipates that the market availability on the U.S. market will start 
by the second week of April 2015. The FDA indication for the use of 
this product is for the treatment of adults who have been diagnosed 
with invasive aspergillosis and mucormycosis. Isavuconazonium has two 
formulations: An intravenous (IV) solution and an oral capsule. The IV 
formulation of isavuconazonium is administered at 200 mg of 
isavuconazole. The oral formulation of isavuconazonium is administered 
at 100 mg of isavuconazole. Dosing is not weight-based. According to 
the applicant, treatment of patients who have been diagnosed with these 
types of infection starts with up to 3 days of IV therapy in the 
inpatient hospital setting followed by daily oral therapy administered 
for the remainder of the inpatient stay and also the duration of 
treatment period, which is 13.4 days.
    As stated in section II.G.1.a. of the preamble of this proposed 
rule, effective October 1, 2015 (FY 2016), the ICD-10 coding system 
will be implemented. We note that the applicant submitted a request for 
unique ICD-10-PCS codes that was presented at the March 18, 2015 ICD-10 
Coordination and Maintenance Committee meeting. If approved, the codes 
will be effective on October 1, 2015 (FY 2016). More information on 
this request can be found on the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html.

[[Page 24442]]

    If the technology were to be approved for a new technology add-on 
payment, we believe its newness period would begin on March 6, 2015, 
the date of FDA approval. At this time, the applicant has not submitted 
any specific information to establish that the technology was not 
available on the U.S. market as of the FDA approval date or to describe 
the reasons for a delay of availability until the second week of April 
2015. The applicant maintained that CRESEMBA[supreg] meets the newness 
criterion.
    CRESEMBA[supreg] is part of the category of drugs known as azole 
antifungal drugs that inhibit the enzyme lanosterol 14 [alpha]-
demethylase. Inhibiting this enzyme disrupts the process of converting 
lanosterol to ergosterol and, therefore, depletes the level of 
ergosterol in the fungal membrane and inhibits fungal growth. Azole 
antifungal drugs are used to treat patients with fungal infections such 
as aspergillosis, and other azole antifungal drugs also used for the 
treatment of these patients include voriconazole, posaconazole, and 
itroconazole. The CDC Web site at http://www.cdc.gov/fungal/diseases/aspergillosis/treatment.html states that voriconazole is used for the 
treatment of patients with invasive aspergillosis, but Amphotericin B 
(Amp B) as well as other antifungal drugs can be used if patients 
cannot take voriconazole or the infection is not responsive to 
voriconazole. Amphotericin B is the first[hyphen]line of therapy and 
the only FDA[hyphen]approved treatment of patients diagnosed with 
mucormycosis. Amphotericin B binds with ergosterol, a component of 
fungal cell membranes, and forms a transmembrane channel that leads to 
membrane leakage, which is the primary effect leading to fungal cell 
death. The third class of antifungal drugs is echinocandins; examples 
in this group are caspofungin, micafungin, and anidulafungin. 
Echinocandins noncompetitively inhibit beta-1, 3-D-glucan synthase 
enzyme complex in susceptible fungi to disturb fungal cell glucan 
synthesis. Beta-glucan destruction prevents resistance against osmotic 
forces, which leads to cell lysis (http://www.cdc.gov).
    According to the applicant, echinocandins are effective against 
aspergillosis. Voriconazole is the recommended treatment for patients 
diagnosed with invasive aspergillosis. However, amphotericin B and 
other antifungal drugs may also be used if voriconazole cannot be 
administered because a patient is suffering from porphyria (a rare 
inherited blood disorder) or has had an allergic reaction to the drug 
or the infection is not responding to treatment using voriconazole. In 
addition, according to the applicant, the efficacy of azole antifungal 
drugs such as posaconazole, in treating mucurmycosis is uncertain but 
has been described in certain situations.
    The applicant stated that it is sometimes challenging to clinically 
distinguish the type of antifungal infection a patient may be 
experiencing. Therefore, the typical treatment of patients exhibiting 
symptoms of infection includes both amphotericin B and voriconazole. 
According to the applicant, for the Medicare population, both drugs are 
usually administered in combination because it is difficult and time-
consuming to delineate the specific type of fungal infections. The 
applicant noted that these patients are often severely ill and 
immediate treatment of these symptoms is essential to the effective 
management of their condition.
    We are concerned that CRESEMBA[supreg] may be substantially similar 
to other currently approved antifungal drugs. We refer readers to the 
FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 through 43814) 
for a discussion of our established criteria for evaluating whether a 
new technology is substantial similar to an existing technology. If a 
technology meets all three of these criteria, it would be considered 
substantially similar to an existing technology and would not be 
considered ``new'' for purposes of new technology add-on payments.
    In evaluating this technology for substantial similarity, we 
believe that CRESEMBA[supreg] has a similar mechanism of action as the 
other groups of antifungal drugs available for the treatment of 
patients with serious fungal infections, such as invasive aspergillosis 
and mucormycosis. As previously noted, voraconazole and itroconazole 
also are commonly used azole antifungals used to treat patients 
diagnosed with aspergillosis, and amphotericin B is a polyene 
antifungal commonly used to treat patients diagnosed with mucormycosis. 
The applicant maintained that the availability of the drug in an oral 
formulation constitutes a different mechanism of action. We disagree 
with the applicant's assertion because we believe a different method of 
administration does not necessarily equate to a different mechanism of 
action. Although the applicant maintained that this technology is not 
substantially similar because it is administered orally, the applicant 
did not describe why it believed a different method of administration 
constitutes a different mechanism of action. Because CRESEMBA[supreg] 
is part of the category of drugs currently available known as azole 
antifungal drugs that inhibit the enzyme lanosterol 14 a-demethylase, 
it appears that the mechanism of action is not different, but that 
merely the method of administration differs.
    With respect to the second criterion for determining substantial 
similarity, we believe that the use of CRESEMBA[supreg] is inclusive of 
the current treatment options available to Medicare beneficiaries and 
is also currently described (although not specifically) by established 
procedure codes that identify similar technologies, specifically other 
antifungal drugs that also are used in the treatment of patients 
diagnosed with similar fungal infections. The use of antifungal drugs 
is considered a nonoperating room procedure which does not impact the 
MS-DRG assignment of a patient case. Therefore, the use of 
CRESEMBA[supreg] would not impact the MS-DRG assignment of a particular 
case. Furthermore, the technology is indicated for use in the treatment 
of the same or similar type of disease and the same or similar patient 
population. According to the applicant, CRESEMBA[supreg] is used in 
conjugation with other treatments, and this is reflected in its 
analysis for the new technology cost criterion. We are concerned that 
this technology is administered with the other currently available 
treatments, and therefore cannot be considered an alternative treatment 
option. Therefore, we believe that CRESEMBA[supreg] may be considered 
substantially similar to other available treatments and cannot be 
considered ``new'' for purposes of new technology add-on payments. We 
are inviting public comments on if, and how, CRESEMBA[supreg] meets the 
newness criterion and our concerns regarding how it is substantially 
similar to other treatments for serious fungal infections.
    To demonstrate that the technology meets the cost criterion, the 
applicant performed two analyses. The applicant searched claims in the 
FY 2013 MedPAR file (across all MS-DRGs) for any case reporting a 
principal or secondary diagnosis of aspergillosis (ICD-9-CM diagnosis 
code 117.3), zygomycosis [phycomycosis or mucormycosis] (ICD-9-CM 
diagnosis code 117.7), or pneumonia in aspergillosis (ICD-9-CM 
diagnosis code 484.6). The applicant excluded any case that was treated 
at a hospital that is not paid under the IPPS, as well as any case 
where Medicare fee-for-service was not the primary payer. The applicant 
calculated the standardized charge for each eligible case and then 
inflated the standardized charge by 10.4427 percent

[[Page 24443]]

using the same inflation factor used by CMS to update the FY 2015 
outlier threshold (79 FR 50379). The applicant assumed that the average 
length of stay for all eligible cases was 13.4 days based on its 
analysis. To determine the charges for the drug, the applicant assumed 
13.4 days of therapy. According to the applicant, dosages of 
isavuconazole for a patient vary based on the day of therapy, but do 
not vary based on the patient's weight. For the first and second day of 
therapy, the patient would be administered a loading dose of 200 
milligrams (mg) every 8 hours. For each subsequent day of therapy, the 
patient would be administered a maintenance dose of 200 mg per day.
    For the first analysis, which was based on 100 percent of all MS-
DRGs, the applicant identified a total of 5,984 cases with at least one 
of the three ICD-9-CM codes (aspergillosis (ICD-9-CM diagnosis code 
117.3), zygomycosis [phycomycosis or mucormycosis] (ICD-9-CM diagnosis 
code 117.7), or pneumonia in aspergillosis (ICD-9-CM diagnosis code 
484.6)) across a total of 333 MS-DRGs. The applicant's rationale for 
using all the MS-DRGs was that it believed any patient diagnosed with 
either invasive aspergillosis or invasive mucormycosis (zygomycosis) 
could be eligible for treatment using isavuconazonium, regardless of 
the MS[hyphen]DRG assignment. The applicant identified the average 
case-weighted threshold amounts for these 333 MS-DRGs as $72,186 using 
Table 10 from the FY 2015 IPPS/LTCH PPS final rule. The applicant did 
not remove charges for the other specific technologies from the average 
case-weighted standardized charge per case. The applicant's rationale 
for not removing these charges was that the patients would be 
administrated isavuconazonium in combination with the other currently 
approved antifungal drugs as an effective treatment plan. The applicant 
computed a final inflated average case-weighted standardized charge per 
case of $151,450. Because this average case-weighted standardized 
charge per case exceeded the average case-weighted threshold amount 
from the FY 2015 Table 10, the applicant maintained that 
CRESEMBA[supreg] meets the cost criterion using this first analysis.
    For its second analysis, the applicant analyzed 39 MS-DRGs that 
accounted for the top 75 cases of patients eligible for treatment using 
isavuconazonium; this was a subset of 4,510 cases. Using a methodology 
similar to the one used in its first analysis, the applicant computed 
the final inflated average case-weighted standardized charge per case 
of $159,622. The applicant identified an average case-weighted 
threshold amount for the 39 MS-DRGs of $74,366 using Table 10 from the 
FY2015 IPPS/LTCH PPS final rule. Because the final inflated average 
case-weighted standardized charge per case exceeded the average case-
weighted threshold amount in the FY 2015 Table 10, the applicant 
maintained that CRESEMBA[supreg] meets the cost criterion using this 
second analysis.
    We are concerned that the applicant did not remove any charges for 
the other antifungal drugs used during treatments (that is, the other 
component of the combination) because the applicant maintained that it 
would most likely be necessary for patients who are treated using 
CRESEMBA[supreg] to also continue treatment using the other antifungal 
drugs or medications in order to achieve successful treatment due to 
the severity of their symptoms. We believe that the applicant should 
have removed the charges for the other antifungal drugs used for 
treatments. We also note that the applicant did not provide information 
to substantiate its assertion that the charges for these cases would 
not be reduced because of the severity of illness among the patients. 
The applicant inferred that patients treated using CRESEMBA[supreg] 
would be dependent upon the simultaneous and combined use of the other 
existing therapies to achieve successful treatment. Therefore, we are 
concerned about the possibility of drug toxicity, poly pharmacy, and 
drug-to-drug interactions, especially among the Medicare population.
    We are seeking public comment on whether CRESEMBA[supreg] meets the 
cost criterion, specifically with regard to our concerns regarding the 
applicant's analyses and methodology.
    With regard to substantial clinical improvement, the applicant 
believed that CRESEMBA[supreg] represents a substantial clinical 
improvement over existing therapies for patients diagnosed with 
invasive aspergillus and mucormycosis based on its potentially improved 
efficacy profile, potentially improved safety profile, more favorable 
pharmacokinetic profile, and improved method of administration. The 
applicant discussed the unmet medical need for alternative treatment 
options for patients diagnosed with invasive aspergillosis and 
mucormycosis. Current treatments have limitations related to safety, 
side effects, and efficacy.25 26 The applicant provided 
information regarding its SECURE study, where the primary endpoint of 
all-cause mortality through day 42 showed that CRESEMBA[supreg] 
demonstrated noninferiority to voriconazole. The primary endpoint of 
all[hyphen]cause mortality through day 42 in the 
intent[hyphen]to[hyphen]treat population (ITT, N = 516) was 18.6 
percent in the isavuconazonium treatment group and 20.2 percent in the 
voriconazole group. However, according to the applicant, the overall 
safety profile for CRESEMBA[supreg] demonstrated similar rates of 
mortality and nonfatal adverse events as the comparator, voriconazole. 
The applicant also shared information from other clinical trials. One 
of these clinical trials that studied the treatment of patients 
diagnosed with invasive aspergillosis showed treatment-emergent adverse 
reactions occurred in 96 percent and 99 percent of patients receiving 
the CRESEMBA[supreg] and voriconazole, respectively. We are concerned 
that the adverse reactions associated with the use of CRESEMBA[supreg] 
and voriconazole appear to be similar. We also are concerned that the 
applicant did not conduct the clinical trials evaluating head-to-head 
comparisons to alternative therapies such as amphotericin B. Currently, 
amphotericin B is the only FDA[hyphen]approved drug for the treatment 
of mucormycosis, which also can be used to treat aspergillosis. The 
applicant's description of the technology was based on peer reviewed 
literature, which may be considered historical data.
---------------------------------------------------------------------------

    \25\ Lin SJ, Schranz J, Teutsch SM.: Aspergillosis 
case[hyphen]fatality rate: systematic review of the literature. 
ClinInfect Dis. 2001;32:358[hyphen]66.
    \26\ Greenberg RN, Scott LJ, Vaughn HH, Ribes JA.: Zygomycosis 
(mucormycosis): emerging clinical importance and new treatments. 
Curr Opin Infect Dis. 2004;17:517[hyphen]25.
---------------------------------------------------------------------------

    With regard to improved efficacy, the applicant made several 
assertions. The applicant maintained that the use of CRESEMBA[supreg] 
can potentially decrease the rate of subsequent diagnostic or 
therapeutic interventions. According to the applicant, the technology 
lacks the adverse side effects of nephrotoxicity associated with 
amphotericin B.\27\ However, we are concerned that the results of the 
study reported by the applicant did not reflect this.
---------------------------------------------------------------------------

    \27\ Walsh TJ, Anaissie EJ, Denning DW, Herbrecht R, 
Kontoyiannis DP, Marr KA, et al.: Treatment of aspergillosis: 
clinical practice guidelines of the Infectious Diseases Society of 
America. Clin Infect Dis. 2008;46:327[hyphen]60.
---------------------------------------------------------------------------

    Specifically, the applicant believed that CRESEMBA[supreg] has 
positive activity against a broad range of fungi, including those 
resistant to other agents, thereby potentially decreasing subsequent 
therapeutic interventions.\28\ However,

[[Page 24444]]

the applicant stated that the referenced literature indicates that 
further in-vivo studies are required in order to confirm the efficacy 
for treatment of severe infections caused by these fungi in 
immunocompromised patients. According to the applicant, 
CRESEMBA[supreg] is used to treat immunocomprised patients who are 
severely ill. The applicant also stated that CRESEMBA[supreg] can be 
used to treat patients diagnosed with invasive fungal infections before 
the pathogen has been identified, thereby potentially decreasing 
subsequent diagnostic and therapeutic interventions.\29\ The applicant 
maintained that the use of CRESEMBA[supreg] decreases the number of 
future hospitalizations or physician visits. We are concerned that the 
applicant did not provide data to support this determination. One of 
the applicant's studies, SECURE, which was a global, Phase 3, 
multicenter, randomized, double-blind, parallel group, noninferiority 
trial that evaluated isavuconazole versus voriconazole for the primary 
treatment of patients with invasive fungal disease (IFDs) caused by 
aspergillus spp. and other filamentous fungi was discussed by the 
applicant in its application. The results of the study were presented 
in a paper stating that the length of stay for patients hospitalized 
with renal impairment was statistically significantly shorter in the 
treatment of patients in the isavuconazole arm (9 days) compared with 
patients treated with voriconazole in the control arm. According to the 
applicant, patients treated with isavuconazonale showed shorter 
hospital length of stay compared to those treated with voriconazole in 
the overall study population. Subgroup analyses of patients who were 
aged 65 years and older and patients with a BMI equal to or greater 
than 30 kg/m2 also had shorter, but not statistically significant, 
differences in length of stay when treated with isavuconazonale 
compared to voriconazole. The paper on the study revealed concerns 
about the small sample size in the subgroup (n = 516) and that the 
differences were not statistically significant.\30\
---------------------------------------------------------------------------

    \28\ Gonz[aacute]lez GM.: Med Mycol. 2009 Feb;47(1):71-6. 
doi:10.1080/13693780802562969. Epub 2008 Dec 18. PMID: 19101837 
[PubMed--indexed for MEDLINE]
    \29\ Kontoyiannis DP, Lewis RE.: How I treat mucormycosis. 
Blood. 2011;118:1216-24.
    \30\ Khandelwal N, Franks B, Shi F, Spalding J, Azie N. Health 
Economic Outcome Analysis of Patients Randomized in the SECURE Phase 
3 Trial Comparing Isavuconazole to Voriconazole for Primary 
Treatment of Invasive fungal Disease Caused by Aspsergillus Species 
or Other Filamentous Fungi.
---------------------------------------------------------------------------

    With regard to improved safety and a more favorable pharmacokinetic 
profile, the applicant made several assertions. The applicant asserted 
that CRESEMBA[supreg] has the potential for simpler and more 
predictable dosing based on improved pharmacokinetics compared with 
other azole antifungal drugs, but the applicant did not provide data to 
substantiate this assertion. In addition, the applicant asserted that 
CRESEMBA[supreg] has a lower drug[hyphen]drug interaction potential 
than voriconazole or itraconazole, but did not provide data to 
substantiate this assertion. Furthermore, the applicant maintained that 
CRESEMBA[supreg] can be safely used in treating patients with renal 
impairment, whereas currently available treatments can harm the 
kidneys.\31\ In the paper accompanying the application, the applicant 
discussed aspergillosis and the various treatment options available and 
the advantages of voriconazole over deoxycholate amphotericin B (D-AMB) 
as primary treatment for patients with invasive aspergillosis. We are 
concerned that these results were not communicated in the resulting 
data provided by the applicant that were obtained from the trials. We 
also are concerned that the applicant did not provide a rationale for 
its assertion that the use of CRESEMBA[supreg] represents a substantial 
clinical improvement for Medicare beneficiaries because of ``simpler 
and more predictable dosing'' nor did the applicant provide additional 
information and data regarding drug-to-drug interactions and 
nephrotoxicity.
---------------------------------------------------------------------------

    \31\ Walsh TJ, Anaissie EJ, Denning DW, Herbrecht R, 
Kontoyiannis DP, Marr KA, et al. Treatment of aspergillosis: 
Clinical practice guidelines of the Infectious Diseases Society of 
America. Clin Infect Dis. 2008;46:327[hyphen]60.
---------------------------------------------------------------------------

    In addition, the applicant maintained that the technology has an 
improved method of administration compared to current treatment 
alternatives. Specifically, the applicant asserted that the 
availability of this technology as an oral formulation is an 
improvement compared to other existing treatments, which are solely 
administered intravenously. We are concerned about the applicant's 
assertion because other currently approved and available antifungal 
drugs, such as voriconazole (tablets, oral suspension, or intravenous 
administration), itraconazole (capsules, oral solution, or parenteral 
solution), and posaconazole (oral suspension or parenteral solution), 
also can be administered orally as well as parenteral for patients 
diagnosed with these types of fungal infections. In addition, we are 
aware that intravenous administration of antifungal drugs may be 
necessary because patients diagnosed with invasive aspergillosis and 
mucuromycosis and treated as inpatients are often severely ill and may 
not be able to tolerate any food or medications orally. We are seeking 
public comments on whether or not CRESEMBA[supreg] meets the 
substantial clinical improvement criterion, specifically taking into 
consideration our concerns described above.
    We did not receive any written public comments in response to the 
New Technology Town Hall Meeting regarding the application for 
CRESEMBA[supreg] for new technology add-on payments.
f. Idarucizumab
    Boehringer Ingelheim Pharmaceuticals, Inc. submitted an application 
for new technology add-on payments for Idarucizumab, a product 
developed as an antidote to reverse the effects of PRADAXA[supreg] 
(Dabigatran), which is also manufactured by Boehringer Ingelheim 
Pharmaceuticals, Inc. Dabigatran is an oral direct thrombin inhibitor 
currently indicated to: (1) Reduce the risk of stroke and systemic 
embolism in patients who have been diagnosed with nonvalvular atrial 
fibrillation (NVAF); (2) treat deep venous thrombosis (DVT) and 
pulmonary embolism (PE) in patients who have been administered a 
parenteral anticoagulant for 5 to 10 days; and (3) reduce the risk of 
recurrence of DVT and PE in patients who have been previously diagnosed 
with NVAF. Currently, unlike the anticoagulant Warfarin, there is no 
specific way to reverse the anticoagulant effect of Dabigatran in the 
event of a major bleeding episode.
    Idarucizumab is a humanized fragment antigen binding (Fab) 
molecule, which specifically binds to Dabigatran to deactivate the 
anticoagulant effect, thereby allowing thrombin to act in blood clot 
formation. The applicant stated that Idarucizumab represents a new 
pharmacologic approach to neutralizing the specific anticoagulant 
effect of Dabigatran in emergency situations. If FDA approval is 
granted, Idarucizumab would be the only FDA-approved therapy available 
to neutralize the anticoagulant effect of Dabigatran. The current 
approach for the management of the anticoagulant effect of Dabigatran 
prior to an invasive procedure is to withhold administration of 
Dabigatran, when possible, for a certain duration of time prior to the 
procedure to allow sufficient time for the patient's kidneys to flush 
out the medication. The duration of time needed to flush out the 
medication prior to the surgical procedure is based on the patient's 
kidney function. According to the applicant, if surgery cannot be

[[Page 24445]]

delayed to allow the kidneys the necessary time to flush out the traces 
of Dabigatran, there is an increased risk of bleeding.
    Based on the proposed FDA indication for Idarucuzimab, the product 
can be used in the treatment of patients who have been diagnosed with 
NVAF and administered Dabigatran to reverse life-threatening bleeding 
events, or who require emergency surgery or medical procedures and 
rapid reversal of the anticoagulant effects of Dabigatran is necessary 
and desired. As of this date, Idarucuzimab has not received approval 
from the FDA. However, in June 2014, the FDA granted Idarucizumab 
Breakthrough Therapy Designation. In addition, the applicant plans to 
seek Fast Track Designation from the FDA. Currently, there are no 
specific ICD-9-CM or ICD-10-PCS procedure codes that describe the use 
of Idarucizumab. As stated above, effective October 1, 2015 (FY 2016), 
the ICD-10 coding system will be implemented. The applicant submitted a 
request for unique ICD-10-PCS codes that was presented at the March 18, 
2015 ICD-10 Coordination and Maintenance Committee meeting. If 
approved, the codes will be effective on October 1, 2015 (FY 2016). 
More information on this request can be found on the CMS Web site at: 
http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html. We are inviting public comments on 
whether Idarucizumab meets the newness criterion.
    With regard to the cost criterion, the applicant conducted four 
analyses. The applicant began by researching the FY 2013 MedPAR file 
for cases that may be eligible for Idarucizumab using a combination of 
ICD-9-CM diagnosis and procedure codes. Specifically, the applicant 
searched the database for cases reporting anticoagulant therapy 
diagnosis codes E934.2 (Agents primarily affecting blood constituents, 
anticoagulants) or V58.61 (Long-term (current) use of anticoagulants) 
in combination with either current standard of care procedure codes 
99.03 (Other transfusion of whole blood), 99.04 (Transfusion of packed 
cells), 99.05 (Transfusion of platelets), 99.06 (Transfusion of 
coagulation factors), 99.07 (Transfusion of other serum), or 39.95 
(Hemodialysis), and Dabigatran indication diagnosis codes 427.31 
(Atrial fibrillation), 453.40 (Acute venous embolism and thrombosis of 
unspecified deep vessels of lower extremity), 453.41 (Acute venous 
embolism and thrombosis of deep vessels of proximal lower extremity), 
453.42 (Acute venous embolism and thrombosis of deep vessels of distal 
lower extremity), 453.50 (Chronic venous embolism and thrombosis of 
unspecified deep vessels of lower extremity), 453.51 (Chronic venous 
embolism and thrombosis of deep vessels of proximal lower extremity), 
453.52 (Chronic venous embolism and thrombosis of deep vessels of 
distal lower extremity), 415.11 (Iatrogenic pulmonary embolism and 
infarction), 415.12 (Septic pulmonary embolism), 415.13 (Saddle embolus 
of pulmonary artery), 415.19 (Other pulmonary embolism and infarction), 
416.2 (Chronic pulmonary embolism), V12.51 (Personal history of venous 
thrombosis and embolism), or V12.55 (Personal history of pulmonary 
embolism).
    To further target potential cases that may be eligible for 
Idarucizumab, the applicant also excluded specific cases based on 
Dabigatran contraindications, including all cases representing patients 
who have been diagnosed with chronic kidney disease (CKD) stage V 
(diagnosis code 585.5), end-stage renal disease (diagnosis code 585.6), 
prosthetic heart valves (diagnosis code V43.3), and cases representing 
patients who have been diagnosed with both CKD stage IV (diagnosis code 
585.4) and either DVT or PE (using the same ICD-9-CM diagnosis codes 
listed above). As a result, the applicant identified 103,752 cases that 
mapped to 694 MS-DRGs. The applicant standardized the charges and 
computed an average case-weighted standardized charge per case of 
$57,611.
    The applicant then identified hospital charges potentially 
associated with the current treatments to reverse anticoagulation, 
specifically charges associated with pharmacy services, dialysis 
services, and laboratory services for blood work. Due to limitations 
associated with the claims data, the applicant was unable to determine 
the specific drugs used to reverse anticoagulation and if these cases 
represented patients who required laboratory services for blood work or 
dialysis services unrelated to the reversal of anticoagulation. 
Therefore, the applicant subtracted 40 percent of the charges related 
to these three categories from the standardized charge per case, based 
on the estimation that the full amount of charges associated with these 
services would not be incurred by hospitals if Idarucizumab is approved 
and available for use in the treatment of patients who have been 
diagnosed with NVAF and administered Dabigatran during treatment. The 
applicant then inflated the standardized charge per case by 10.4227 
percent, the same inflation factor used by CMS to update the FY 2015 
outlier threshold (79 FR 50379). This resulted in an inflated average 
case-weighted standardized charge per case of $59,582. Using the FY 
2015 IPPS Table 10 thresholds, the average case-weighted threshold 
amount across all 694 MS-DRGs is $54,850 (all calculations above were 
performed using unrounded numbers). Because the inflated average case-
weighted standardized charge per case exceeds the average case-weighted 
threshold amount, the applicant maintained that the technology meets 
the cost criterion under this analysis.
    The applicant also performed a similar analysis by using the same 
data from the FY 2013 MedPAR file and subtracting 60 percent of the 
charges associated with pharmacy services, dialysis services, and 
laboratory services for blood work. This resulted in an inflated 
average case-weighted standardized charge per case of $57,560. Using 
the FY 2015 IPPS Table 10 thresholds, the average case-weighted 
threshold amount across all 694 MS-DRGs is $54,850 (all calculations 
above were performed using unrounded numbers). Because the inflated 
average case-weighted standardized charge per case for the applicable 
MS-DRGs exceeds the average case-weighted threshold amount, the 
applicant maintained that the technology also meets the cost criterion 
under this analysis.
    Further, the applicant conducted two additional analyses using the 
same data from the FY 2013 MedPAR file and variables used in the 
previous analyses. However, instead of using potentially eligible cases 
that mapped to 100 percent of the 694 MS-DRGs identified, the applicant 
used potentially eligible cases that mapped to the top 75 percent of 
the 694 MS-DRGs identified. By applying this limitation, the applicant 
identified 77,667 cases that mapped to 92 MS-DRGs. Under the analysis' 
variable that subtracted 40 percent of the charges associated with the 
current treatments to reverse anticoagulation, the applicant computed 
an inflated average case-weighted standardized charge per case of 
$56,627. Under the analysis' variable that subtracted 60 percent of the 
charges associated with the current treatments to reverse 
anticoagulation, the applicant computed an inflated average case-
weighted standardized charge per case of $54,677. Using the FY 2015 
IPPS Table 10 thresholds, the average case-weighted threshold amount 
across all 92 MS-DRGs using both scenarios is $53,008 (all calculations 
above were performed using unrounded numbers). Because the inflated 
average case-weighted

[[Page 24446]]

standardized charge per case exceeds the average case-weighted 
threshold amount, the applicant maintained that the technology also 
meets the cost criterion under these variant analyses.
    The applicant noted that the inflated average case-weighted 
standardized charge per case computed using all four scenarios did not 
include any charges for Idarucizumab. Therefore, the applicant 
maintained that the technology would also meet the cost criterion if 
charges for Idarucizumab were included because the inflated average 
case-weighted standardized charge per case would increase and further 
exceed the average case-weighted threshold amount using the variables 
of all four analyses. We are inviting public comments regarding the 
applicant's analyses with respect to the cost criterion.
    With regard to substantial clinical improvement, according to the 
applicant, there are currently no specific FDA-approved antidotes to 
reverse the anticoagulant effects of Dabigatran. Management of the 
treatment of patients who have been diagnosed with NVAF and 
administered Dabigatran and experience bleeding may often include 
supportive care such as Hemodialysis and the use of fresh frozen 
plasma, blood factor products such as prothrombin complex concentrates 
(PCC), activated prothrombin complex concentrates, and recombinant 
factor VIIa or delayed intervention. Protamine sulfate and Vitamin K 
are typically used to reverse the effects of Heparin and Warfarin, 
respectively. However, due to the mechanism of action in Dabigatran, 
the applicant maintained that the use of protamine sulfate and Vitamin 
K may not be effective to reverse the anticoagulant effect of 
Dabigatran.
    The applicant provided information regarding the management of 
major bleeding events experienced by patients who were administered 
Dabigatran and Warfarin during the RE-LY trial.\32\ During this study, 
most major bleeding events were only managed by supportive care. 
Patients who were administered 150 mg of Dabigatran were transfused 
with pack red blood cells more often when compared to patients who were 
administered Warfarin (61.4 percent versus 49.9 percent, respectively). 
However, patients who were administered Warfarin were transfused with 
plasma more often when compared to patients who were administered 150 
mg of Dabigatran (30.2 percent versus 21.6 percent, respectively). In 
addition, the use of Vitamin K in the treatment of patients who were 
administered Warfarin was more frequent when compared to the frequency 
of use in the treatment of patients who were administered 150 mg of 
Dabigatran (27.3 percent versus 10.3 percent, respectively). The use of 
PCCs, recombinant factor VIIa and other coagulation factor replacements 
in the treatment of patients who were administered both Warfarin and 
150 mg of Dabigatran was minimal, and did not significantly differ in 
frequency when compared among patients assigned to either group. 
Hemodialysis was used in a single case.
---------------------------------------------------------------------------

    \32\ Healy, et al.: Periprocedural bleeding and thromboembolic 
events with dabigatran compared with warfarin: results from the 
randomized evaluation of long-term anticoagulation therapy (RE-LY) 
randomized trial, Circulation, 2012; 126:343-348.
---------------------------------------------------------------------------

    The applicant reported that, currently, it is recommended that the 
administration of Dabigatran be discontinued 1 to 2 days (CrCl >=50 ml/
min) or 3 to 5 days (CrCl <50 ml/min), if possible, before invasive or 
surgical procedures because of the increased risk of bleeding.\33\ A 
longer period of discontinuation time should be considered for patients 
undergoing major surgery, spinal puncture, or placement of a spinal or 
epidural catheter or port, if complete hemostasis is required. The 
applicant stated that delaying emergency medical or surgical procedures 
can cause urgent conditions to become more severe if intervention is 
not initiated. The applicant further maintained that delaying emergency 
medical or surgical procedures for an extended period of time can 
ultimately lead to negative healthcare outcomes and increased 
healthcare costs. The applicant asserted that rapidly reversing the 
anticoagulant effect of Dabigatran administered to patients that 
require an urgent medical procedure or surgery allows the medical 
procedure or surgery to be performed in a timely manner, which in turn 
may decrease complications and minimize the need for more costly 
therapies.
---------------------------------------------------------------------------

    \33\ Pradaxa[supreg] (Dabigatran Etexilate Mesylate) prescribing 
information. Ridgefield, CT: Boehringer Ingelheim; 2014.
---------------------------------------------------------------------------

    The applicant noted that Idarucizumab was shown to neutralize the 
anticoagulant effect of Dabigatran in both animal models and healthy 
human volunteers.\34\ In a swine blunt liver trauma injury model, the 
applicant stated that Idarucizumab effectively reversed life-
threatening bleeding episodes resulting from trauma in pigs. The 
applicant also provided data from a randomized, double-blind, placebo-
controlled phase I study of healthy male volunteers to investigate the 
safety, tolerability, and pharmacokinetics of administering single 
rising doses of Idarucizumab (Part 1) and explore the variant of 
dosages of Idarucizumab administered to patients that effectively 
reversed the anticoagulant effect of Dabigatran (Part 2). Safety data 
is limited in humans to 110 healthy male patients enrolled in the study 
that were administered dosages of Idarucizumab that ranged from 20 mg 
to 8 grams. In this study, 135 patients received placebo. The applicant 
reported that adverse events were generally mild in intensity and non-
specific. Healthy human volunteers enrolled in the phase I study 
(1321.1) were administered Idarucizumab in dosages of 2 and 4 grams, 
which resulted in immediate and complete reversal of the anticoagulant 
effect of Dabigatran that was sustained for several hours. The 
applicant noted that in preclinical studies, the reversal of the 
anticoagulant effects of Dabigatran was associated with the reversal of 
bleeding. These effects were consistent in animal models of renal 
dysfunction, hypovolemia and shock, and trauma related bleeding. The 
applicant concluded that the data from these studies demonstrates that 
Idarucizumab effectively, safely, and potently reverses the 
anticoagulant effect of Dabigatran in both animal models and healthy 
human volunteers.
---------------------------------------------------------------------------

    \34\ Honickel, et al.: Reversal of dabigatran anticoagulation ex 
vivo: Porcine study comparing prothrombin complex concentrates and 
idarucizumab, Thrombosis and Hemostasis, International Journal for 
Vascular Biology and Medicine, Vol. 113, April 2015.
---------------------------------------------------------------------------

    With regard to the substantial clinical improvement criterion, we 
believe that Idarucizumab, if approved by the FDA, may represent a 
treatment option that is not currently available to Medicare 
beneficiaries and, therefore, represents a substantial clinical 
improvement. However, we are concerned that the clinical data are not 
sufficient. Specifically, the applicant provided data from an animal 
model. In addition, the primary clinical data in relation to human 
volunteers are based primarily on a trial to measure safety. While the 
applicant did provide clinical data on the effectiveness of 
Idarucizumab, we are concerned that the evidence presented does not 
support the substantial clinical improvement criterion. Specifically, 
the applicant provided data from a small sample used to demonstrate 
effectiveness. Usually during clinical studies, phase III of a clinical 
trial is typically used to gather data from a larger patient population 
to demonstrate effectiveness. We are inviting public comments on 
whether or not Idarucizumab meets the substantial

[[Page 24447]]

clinical improvement criterion, specifically in regard to these 
concerns.
g. LUTONIX[supreg] Drug-Coated Balloon (DCB) Percutaneous Transluminal 
Angioplasty (PTA) Catheter and IN.PACTTM 
AdmiralTM Paclitaxel Coated Percutaneous Transluminal 
Angioplasty (PTA) Balloon Catheter
    Two manufacturers, CR Bard Inc. and Medtronic, submitted 
applications for new technology add-on payments for FY 2016 for 
LUTONIX[supreg] Drug-Coated Balloon (DCB) Percutaneous Transluminal 
Angioplasty (PTA) Catheter (LUTONIX[supreg]) and IN.PACTTM 
AdmiralTM Paclitaxel Coated Percutaneous Transluminal 
Angioplasty (PTA) Balloon Catheter (IN.PACTTM 
AdmiralTM), respectively. Both of these technologies are 
drug-coated balloon angioplasty treatments for patients diagnosed with 
peripheral artery disease (PAD). Typical treatments for patients with 
PAD include angioplasty, stenting, atherectomy and vascular bypass 
surgery. PAD most commonly occurs in the femoropopliteal segment of the 
peripheral arteries, is associated with significant levels of morbidity 
and impairment in quality of life, and requires treatment to reduce 
symptoms and prevent or treat ischemic events.\35\ Treatment options 
for symptomatic PAD include noninvasive treatment such as medication 
and life-style modification (for example, exercise programs, diet, and 
smoking cessation) and invasive options which include endovascular 
treatment and surgical bypass. The 2013 American College of Cardiology 
and American Heart Association (ACC/AHA) guidelines for the management 
of PAD recommend endovascular therapy as the first-line treatment for 
femoropopliteal artery lesions in patients suffering from claudication 
(Class I, Level A recommendation).\36\
---------------------------------------------------------------------------

    \35\ Tepe G, Zeller T, Albrecht T, Heller S, Schwarzw[auml]lder 
U, Beregi JP, Claussen CD, Oldenburg A, Scheller B, Speck U.: Local 
delivery of paclitaxel to inhibit restenosis during angioplasty of 
the leg. N Engl J Med 2008; 358: 689-99.
    \36\ Anderson JL, Halperin JL, Albert NM, Bozkurt B, Brindis RG, 
Curtis LH, DeMets D, Guyton RA, Hochman JS, Kovacs RJ, Ohman EM, 
Pressler SJ, Sellke FW, Shen WK.: Management of patients with 
peripheral artery disease (compilation of 2005 and 2011 ACCF/AHA 
guideline recommendations): a report of the American College of 
Cardiology Foundation/American Heart Association Task Force on 
Practice Guidelines. J Am Coll Cardiol 2013; 61:1555-70. Available 
at: http://dx.doi.org/10.1016/j.jacc.2013.01.004.
---------------------------------------------------------------------------

    The applicants for LUTONIX[supreg] and IN.PACTTM 
AdmiralTM stated that, in patients diagnosed with PAD, the 
femoropopliteal artery is characterized by difficult to treat lesions 
that can be long and diffuse, in a vessel that is considered the most 
mechanically stressed artery with a number of dynamic forces that 
impact the artery including shortening/elongation, torsion, compression 
and flexion. According to the applicants, the unique challenges of 
treating the femoropopliteal artery in patients diagnosed with PAD 
relate to insufficient outcomes from current endovascular therapies, in 
particular PTA and stent implantations. Coating of femoral and coronary 
stents with an antiproliferative drug, such as paclitaxel, sirolimus, 
everolimus, or zotarolimus, that is slowly released when it comes in 
contact with the arterial wall, is intended to reduce development of 
restenosis in the stented segment of the artery.37 38
---------------------------------------------------------------------------

    \37\ Owens, CD.: Drug eluting balloon overview: technology and 
therapy. Presented at LINC 2011, Leipzig, Germany.
    \38\ Scheller B.: Opportunities and limitations of drug-coated 
balloon in interventional therapies. Herz 2011;36:232-40.
---------------------------------------------------------------------------

    The applicants noted that drug-coated balloon catheters are 
designed to deliver an antiproliferative drug directly to the arterial 
segment being dilated. Rather than using a stent to deliver the drug 
slowly to the dilated area, the drug coating of a balloon is designed 
to transfer the drug to the arterial wall by direct contact over a few 
minutes. The applicant maintained that if the drug is absorbed into the 
arterial wall, rather than being washed away by blood flow once the 
balloon is deflated, the drug can exert its antiproliferative effects 
on the vessel with the goal of preventing restenosis.
    The applicants stated that the drug-coated balloon catheter is a 
device-drug combination product comprised of a device component (an 
over-the-wire balloon catheter) and a drug component (a paclitaxel-urea 
coating in the case of IN.PACTTM and a paclitaxel- sorbitol 
for LUTONIXTM AdmiralTM) on the balloon, intended 
for the treatment of patients with PAD, specifically superficial 
femoral artery (SFA) and popliteal artery disease. The device is 
engineered for two modes of action: the primary mode of action is 
attributable to the balloon's mechanical dilatation of de novo or 
restenotic lesions in the vessel; and the secondary mode of action 
consists of drug delivery and application of paclitaxel to the vessel 
wall to inhibit the restenosis that is normally associated with the 
proliferative response to the PTA procedure. Following predilatation 
with a nondrug-coated PTA balloon, the interventionalist selects a 
drug-coated balloon with diameter of 100 percent of reference vessel 
diameter (RVD) and length sufficient to treat 5mm proximal and distal 
to the target lesion and predilated segment (including overlap of 
multiple balloons). The interventionalist inflates the drug-coated 
balloon for a minimum inflation time of 30 seconds for delivery of 
paclitaxel, and keeps the balloon inflated for as long as necessary to 
achieve a satisfactory procedural result, which is the standard of care 
for all balloon angioplasties.
    According to both applicants, LUTONIX[supreg] and 
IN.PACTTM AdmiralTM are the first drug coated 
balloons that can be used for treatment of patients who are diagnosed 
with PAD. Because cases eligible for the two devices would group to the 
same MS-DRGs and we believe that these devices are substantially 
similar to each other (that is, they are intended to treat the same or 
similar disease in the same or similar patient population and are 
purposed to achieve the same therapeutic outcome using the same or 
similar mechanism of action), we believe that it is appropriate to 
evaluate both technologies as one application for new technology add-on 
payment under the IPPS. The applicants submitted separate cost and 
clinical data, and we reviewed and discuss each set of data separately. 
However, we intend to make one determination regarding new technology 
add-on payments that will apply to both devices. We believe that this 
is consistent with our policy statements in the past regarding 
substantial similarity. Specifically, we have noted that approval of 
new technology add-on payments would extend to all technologies that 
are substantially similar (66 FR 46915), and that we believe that 
continuing our current practice of extending a new technology add-on 
payment without a further application from the manufacturer of the 
competing product or a specific finding on cost and clinical 
improvement if we make a finding of substantial similarity among two 
products is the better policy because we avoid--
     Creating manufacturer-specific codes for substantially 
similar products;
     Requiring different manufacturers of substantially similar 
products from having to submit separate new technology applications.
     Having to compare the merits of competing technologies on 
the basis of substantial clinical improvement; and
     Bestowing an advantage to the first applicant representing 
a particular new technology to receive approval. (70 FR 47351)
    If these substantially similar technologies had been submitted for 
review in different (and subsequent)

[[Page 24448]]

years, rather than the same year, we would evaluate and make a 
determination on the first application and apply that same 
determination to the second application. However, because the 
technologies have been submitted for review in the same year, we 
believe it is appropriate to consider both sets of cost data and 
clinical data in making a determination because we do not believe that 
it is possible to choose one set of data over another set of data in an 
objective manner.
    CR Bard, Inc. received FDA approval for LUTONIX[supreg] on October 
9, 2014. Commercial sales in the U.S. market began on October 10, 2014. 
Medtronic received FDA approval for IN.PACTTM 
AdmiralTM on December 30, 2014. Commercial sales in the U.S. 
market began on January 29, 2015. As stated in section II.G.1.a. of the 
preamble of this proposed rule, effective October 1, 2015 (FY 2016), 
the ICD-10 coding system will be implemented. We note that the 
applicant submitted a request and presented at the September 2014 ICD-
10 Coordination and Maintenance Committee Meeting to create ICD-10-PCS 
codes to uniquely identify drug-coated PTA balloons used for treating 
PAD. More information on this request can be found on the CMS Web site 
at: http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html.
    We received public comments during and after the ICD-10 
Coordination and Maintenance Committee meeting that supported the 
creation of unique codes to identify the use of a drug-coated balloon 
in procedures performed for treating PAD. As a result, the following 
ICD-10-PCS codes listed in the table below were created and are 
effective October 1, 2015 (FY 2016):

----------------------------------------------------------------------------------------------------------------
               ICD-10-PCS code                                         Code description
----------------------------------------------------------------------------------------------------------------
047K041.....................................  Dilation of right femoral artery with drug-eluting intraluminal
                                               device using drug-coated balloon, open approach.
047K0D1.....................................  Dilation of right femoral artery with intraluminal device using
                                               drug-coated balloon, open approach.
047K0Z1.....................................  Dilation of right femoral artery using drug-coated balloon, open
                                               approach.
047K341.....................................  Dilation of right femoral artery with drug-eluting intraluminal
                                               device using drug-coated balloon, percutaneous approach.
047K3D1.....................................  Dilation of right femoral artery with intraluminal device using
                                               drug-coated balloon, percutaneous approach.
047K3Z1.....................................  Dilation of right femoral artery using drug-coated balloon,
                                               percutaneous approach.
047K441.....................................  Dilation of right femoral artery with drug-eluting intraluminal
                                               device using drug-coated balloon, percutaneous endoscopic
                                               approach.
047K4D1.....................................  Dilation of right femoral artery with intraluminal device using
                                               drug-coated balloon, percutaneous endoscopic approach.
047K4Z1.....................................  Dilation of right femoral artery using drug-coated balloon,
                                               percutaneous endoscopic approach.
047L041.....................................  Dilation of left femoral artery with drug-eluting intraluminal
                                               device using drug-coated balloon, open approach.
047L0D1.....................................  Dilation of left femoral artery with intraluminal device using
                                               drug-coated balloon, open approach.
047L0Z1.....................................  Dilation of left femoral artery using drug-coated balloon, open
                                               approach.
047L341.....................................  Dilation of left femoral artery with drug-eluting intraluminal
                                               device using drug-coated balloon, percutaneous approach.
047L3D1.....................................  Dilation of left femoral artery with intraluminal device using
                                               drug-coated balloon, percutaneous approach.
047L3Z1.....................................  Dilation of left femoral artery using drug-coated balloon,
                                               percutaneous approach.
047L441.....................................  Dilation of left femoral artery with drug-eluting intraluminal
                                               device using drug-coated balloon, percutaneous endoscopic
                                               approach.
047L4D1.....................................  Dilation of left femoral artery with intraluminal device using
                                               drug-coated balloon, percutaneous endoscopic approach.
047L4Z1.....................................  Dilation of left femoral artery using drug-coated balloon,
                                               percutaneous endoscopic approach.
047M041.....................................  Dilation of right popliteal artery with drug-eluting intraluminal
                                               device using drug-coated balloon, open approach.
047M0D1.....................................  Dilation of right popliteal artery with intraluminal device using
                                               drug-coated balloon, open approach.
047M0Z1.....................................  Dilation of right popliteal artery using drug-coated balloon, open
                                               approach.
047M341.....................................  Dilation of right popliteal artery with drug-eluting intraluminal
                                               device using drug-coated balloon, percutaneous approach.
047M3D1.....................................  Dilation of right popliteal artery with intraluminal device using
                                               drug-coated balloon, percutaneous approach.
047M3Z1.....................................  Dilation of right popliteal artery using drug-coated balloon,
                                               percutaneous approach.
047M441.....................................  Dilation of right popliteal artery with drug-eluting intraluminal
                                               device using drug-coated balloon, percutaneous endoscopic
                                               approach.
047M4D1.....................................  Dilation of right popliteal artery with intraluminal device using
                                               drug-coated balloon, percutaneous endoscopic approach.
047M4Z1.....................................  Dilation of right popliteal artery using drug-coated balloon,
                                               percutaneous endoscopic approach.
047N041.....................................  Dilation of left popliteal artery with drug-eluting intraluminal
                                               device using drug-coated balloon, open approach.
047N0D1.....................................  Dilation of left popliteal artery with intraluminal device using
                                               drug-coated balloon, open approach.
047N0Z1.....................................  Dilation of left popliteal artery using drug-coated balloon, open
                                               approach.
047N341.....................................  Dilation of left popliteal artery with drug-eluting intraluminal
                                               device using drug-coated balloon, percutaneous approach.
047N3D1.....................................  Dilation of left popliteal artery with intraluminal device using
                                               drug-coated balloon, percutaneous approach.
047N3Z1.....................................  Dilation of left popliteal artery using drug-coated balloon,
                                               percutaneous approach.
047N441.....................................  Dilation of left popliteal artery with drug-eluting intraluminal
                                               device using drug-coated balloon, percutaneous endoscopic
                                               approach.
047N4D1.....................................  Dilation of left popliteal artery with intraluminal device using
                                               drug-coated balloon, percutaneous endoscopic approach.
047N4Z1.....................................  Dilation of left popliteal artery using drug-coated balloon,
                                               percutaneous endoscopic approach.
----------------------------------------------------------------------------------------------------------------

    As we discuss above, the approval of new technology add-on payments 
would extend to all technologies that are substantially similar. 
Otherwise, our payment policy would bestow an advantage to the first 
applicant to receive approval for a particular new technology (66 FR 
46915). Moreover, as we discuss above, we believe that applications for 
substantially similar technologies should be evaluated in a manner that 
avoids, among other things, having to compare the merits of competing 
technologies on the basis of substantial clinical improvement. If we 
receive applications for substantially similar technologies in 
different years, we would apply the first determination to any 
subsequent applications for substantially similar technologies. 
However, because, in this case, two substantially similar technologies 
have applied for a new technology add-on payment for the same Federal 
fiscal year, we believe it is consistent with our policy to make one 
determination using all of the information submitted for the

[[Page 24449]]

technologies rather than choosing one set of information to consider 
and not considering the other set of information. We believe that, in 
accordance with our policy, it is appropriate to use the earliest 
market availability date submitted as the beginning of the newness 
period. Accordingly, for both devices, based on our policy, if approved 
for new technology add-on payments, we believe that the beginning of 
the newness period would be October 10, 2014. We are inviting public 
comments on whether these two technologies meet the newness criterion.
    As we stated above, each applicant submitted separate analyses 
regarding the cost criterion for each of their devices and both 
applicants maintained that their device meets the cost criterion. We 
summarize each analysis below.
    With regard to LUTONIX[supreg], to demonstrate that the technology 
meets the cost criterion, the applicant performed three different 
analyses. The applicant first searched the FY 2013 MedPAR data file 
that was used for the recalibration of the FY 2015 MS-DRG relative 
payment weights in the FY 2015 IPPS/LTCH PPS final rule. The applicant 
applied the standard trims that CMS used when selecting cases for IPPS 
rate recalibration as described in the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 49911). In other words, the applicant included cases from IPPS 
hospitals and Maryland hospitals and excluded cases paid by Medicare 
Advantage plans, cases from hospitals that did not submit charges in a 
sufficiently broad range of revenue centers, and statistical outlier 
cases as described in the FY 2015 IPPS/LTCH PPS final rule. The 
applicant then searched for all claims reporting ICD-9-CM procedure 
code 39.50 (Angioplasty of other non-coronary vessel(s)) and also 
reporting at least one of the following seven ICD-9-CM diagnosis codes 
(440.20 (Atherosclerosis of native arteries of the extremities, 
unspecified), 440.21 (Atherosclerosis of native arteries of the 
extremities with intermittent claudication), 440.22 (Atherosclerosis of 
native arteries of the extremities with rest pain), 440.23 
(Atherosclerosis of native arteries of the extremities with 
ulceration), 440.24 (Atherosclerosis of native arteries of the 
extremities with gangrene), 440.29 (Other atherosclerosis of native 
arteries of the extremities), and 443.9 (Peripheral vascular disease, 
unspecified indicating peripheral artery disease). The applicant 
excluded all claims that reported any ICD-9-CM procedure codes 
involving a stent. A total of 23,157 cases reporting peripheral 
angioplasty were identified. Of these 23,157 cases, MS-DRGs 252, 253, 
and 254 (Other Vascular Procedures with MCC, with CC and without CC/
MCC, respectively) accounted for 65 percent of cases; MS-DRGs 237 and 
238 (Major Cardiovascular Procedures with MCC and without MCC, 
respectively), MS-DRGs 239 and 240 (Amputation for Circulatory System 
Disorders Except Upper Limb and Toe with MCC and with CC, 
respectively), and MS-DRG 853 (Infectious and Parasitic Diseases with 
Operating Room Procedure with MCC) accounted for 17 percent of cases 
(among these, peripheral angioplasty was secondary to some other 
circulation-related procedure: a major cardiovascular procedure (MS-
DRGs 237 and 238), amputation due to poor circulation (MS-DRGs 239 and 
240), or (typically) amputation with sepsis (MS-DRG 853)). The 
remaining 18 percent of cases were spread across a large number of 
other MS-DRGs. Next, the applicant obtained the average case-weighted 
charge per case based on the distribution of cases by MS-DRG and then 
identified the average case-weighted threshold for the three MS-DRG 
groupings from the threshold amounts in Table 10 of the FY 2015 IPPS/
LTCH PPS final rule. The applicant then calculated the unadjusted 
(unstandardized) average case-weighted charge per case for all MS-DRGs. 
According to the applicant, charges were not removed for any prior 
technology. To estimate the charge for the new technology, the 
applicant divided the projected cost per patient by the national 
average CCR for supplies (0.292) in the FY 2015 IPPS/LTCH PPS final 
rule, to arrive at the average case-weighted standardized charges per 
case. The average case-weighted standardized charges per case for the 
three primary MS-DRGs 252-254 group (65 percent), the five additional 
MS-DRGs 237-240 and MS-DRG 853 group (17 percent), and the other MS-
DRGs (18 percent) were $69,243, $81,156, and $95,138, respectively. The 
applicant then inflated the average standardized case-weighted charges 
per case from FY 2013 to FY 2015 using the 2-year inflation factor of 
10.44 percent specified in the FY 2015 IPPS/LTCH PPS final rule and 
added charges related to the new technology to the average case-
weighted standardized charges per case, although the applicant 
indicated that it was not clear on the need to include an inflation 
factor. The final inflated average case-weighted standardized charges 
per case for the three primary MS-DRG groups (65 percent), the five 
additional MS-DRG groups (17 percent), and across other MS-DRGs (18 
percent) were $85,386, $98,543, and $104,052, respectively. Because the 
final inflated average case-weighted standardized charge amounts exceed 
the corresponding average case-weighted threshold amounts of $69,594, 
$74,449, and $75,215, respectively, using the FY 2015 IPPS Table 10, 
the applicant maintained that the LUTONIX[supreg] meets the cost 
criterion for new technology add-on payments.
    With regard to IN.PACTTM AdmiralTM, to 
demonstrate that the technology meets the cost criterion, the applicant 
performed two different analyses. The applicant believed that a case 
involving an angioplasty procedure that used the IN.PACTTM 
AdmiralTM drug-coated balloon catheter would map to the same 
MS-DRGs as a case involving a plain balloon angioplasty procedure, MS-
DRGs 252, 253, and 254 (Other Vascular Procedures with MCC, with CC, 
and without CC/MCC, respectively). The applicant first searched the FY 
2013 MedPAR claims data that were used for the recalibration of the FY 
2015 MS-DRG relative payment weights in the FY 2015 IPPS/LTCH PPS final 
rule. The data in this file included discharges occurring on October 1, 
2012 through September 30, 2013. The applicant excluded claims for all 
discharges for Medicare beneficiaries enrolled in a Medicare Advantage 
plan. The applicant also limited claims to those hospitals that were 
included in the FY 2013 IPPS Final Rule Impact File. In addition, the 
applicant removed claims in accordance with the trims specified in the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53326) that were used to 
recalibrate the MS-DRG relative payment weights. The applicant then 
searched for all claims reporting ICD-9-CM procedure code 39.50 
(Angioplasty of other non-coronary vessel(s)) in combination with 
claims reporting at least one of the following seven ICD-9-CM diagnosis 
codes (440.20 through 440.24, 440.29, and 443.9) indicating peripheral 
artery disease. The applicant excluded all claims that reported any 
ICD-9-CM procedure codes for stent implantation. The applicant believed 
that excluding all cases reporting stenting procedures would 
potentially underestimate the average charges for cases reporting 
peripheral angioplasty. A total of 23,157 cases involving peripheral 
angioplasty procedures were identified. Of these 23,157 cases, a 
majority (65 percent; 15,040 cases) mapped to one of the 3 primary MS-
DRGs, MS-DRGs 252, 253, or 254. The remaining 35 percent of the cases

[[Page 24450]]

(8,117) were assigned to a number of MS-DRGs other than the 3 primary 
MS-DRGs. Next, the applicant determined the distribution of cases by 
MS-DRG and the case-weighted threshold amounts from Table 10 in the FY 
2015 IPPS/LTCH PPS final rule, for both the primary MS-DRG group and 
the total MS-DRG group. The applicant began by calculating the 
unadjusted (unstandardized) case-weighted average charge per case for 
all MS-DRGs. Following this computation, the applicant standardized the 
charges on each of the identified claims using the FY 2013 factors from 
the FY 2015 IPPS/LTCH PPS Final Rule Impact File, to match the year of 
the claims data used in this analysis (FY 2013 MedPAR file). According 
to the applicant, charges were not removed for any other specific 
technologies that may have been used because the applicant expected 
that a plain balloon will be utilized to predilate the vessel in a 
majority of drug-coated balloon angioplasty cases prior to the use of 
the drug-coated balloon (that is, the applicant did not believe it was 
necessary to remove charges associated with the other specific prior 
technology (a plain PTA balloon catheter in this case). The applicant 
then inflated the average case-weighted standardized charges per case 
from FY 2013 to FY 2015 using the 2-year inflation factor of 10.44 
percent specified in the FY 2015 IPPS/LTCH PPS final rule and added 
charges related to the new technology to the average charges per case. 
The final inflated average case-weighted standardized charge per case 
both for the primary MS-DRGs group and the total MS-DRG group were 
$82,944 and $101,611, respectively. Because the final inflated average 
case-weighted standardized charge per case for the applicable MS-DRG 
exceeds the average case-weighted threshold amounts of $69,594 and 
$75,215, respectively, using the FY 2015 IPPS Table 10, the applicant 
maintained that the IN.PACTTM AdmiralTM 
technology meets the cost criterion for new technology add-on payments.
    We are concerned that both applicants excluded cases of patients 
that received stent implantations from their analysis because the 
applicants believed that their technology can be used instead of 
stenting. We are seeking public comments on whether LUTONIX[supreg] and 
IN.PACTTM AdmiralTM meet the cost criterion.
    With regard to substantial clinical improvement, the applicant 
believed that LUTONIX[supreg] represents a substantial clinical 
improvement because it meets an unmet clinical need by providing access 
to ``no stent zones'' and because it can achieve greater patency; 
preserve the flexibility of future interventions; and address stent 
fractures and re-stenosis.39 40
---------------------------------------------------------------------------

    \39\ Scheinert, D., et al.: Prevalence and clinical impact of 
stent fractures after femoropopliteal stenting. J Am Coll Cardiol, 
2005. 45(2): p. 312-5.
    \40\ Klein, A.J., et al.: Quantitative assessment of the 
conformational change in the femoropopliteal artery with leg 
movement. Catheter Cardiovasc Interv, 2009. 74(5): p. 787-98.
---------------------------------------------------------------------------

    The applicant shared the findings from its LEVANT 1 and LEVANT 2 
trials.
    LEVANT 1: In the LEVANT 1 trial, 101 patients were randomized to a 
LUTONIX[supreg] drug-coated balloon treatment group or a control group 
that received percutaneous transluminal angioplasty (PTA) only. The 
primary endpoint of mean angiographic Late Lumen Loss at 6 months 
favored the LUTONIX[supreg] drug-coated balloon treatment group 
(0.461.13) compared to the control PTA group (1.091.07), with a p-value of 0.016.
    We are concerned that the results were not statistically 
significant with regard to the p-value documented. Adverse events were 
similar for both groups and through 24 months; the percentage of 
patients with any death, amputation, or target vessel thrombosis was 8 
percent in the treatment group compared to 12 percent in the control 
group.
    LEVANT 2: The LEVANT 2 study is the applicant's pivotal study that 
was conducted as a prospective, multicenter, single blind, 2:1 (test: 
control) randomized trial comparing the LUTONIX[supreg] drug-coated 
balloon angioplasty to standard balloon angioplasty used during the 
treatment of patients with femoropopliteal arteries. The applicant 
documented that the patient characteristics and lesions in both groups 
were well-matched; 43 percent of patients were diabetic; 35 percent 
were current smokers; 37 percent were female; and 8 percent had 
critical limb ischemia.
    The study was conducted to show that drug-coated balloon 
angioplasty improves clinical outcomes for a patient population as 
compared to currently available treatments. All endpoints were 
adjudicated by a blinded Clinical Events Committee (CEC) and duplex 
ultrasound and angiographic core laboratories.
    The applicant specified two primary endpoints that must both be met 
in order for the study to be successful. The first endpoint was primary 
patency at 12 months, defined as freedom from target lesion restenosis 
and target lesion revascularization (TLR). The results were the 
following: primary patency for LUTONIX[supreg] was 65.2 percent 
compared to primary patency of 52.6 percent for PTA. Kaplan-Meier 
analysis was 73.5 percent for LUTONIX[supreg] compared to 56.8 percent 
for PTA (p <0.001). The second primary efficacy endpoints were 
composite safety endpoints at 12 months, which included freedom from 
index-limb amputation; reintervention and related death. The results 
were 83.9 percent for LUTONIX[supreg] compared to 79.0 percent for PTA.
    The secondary efficacy endpoints at 12 months for this trial were 
freedom from Target lesion revascularization (TLR), and the results 
were 89.7 percent for the LUTONIX[supreg] treatment group compared to 
84.8 percent for the PTA control group, with p = 0.17. Another end 
point was freedom from Target vessel revascularization (TVR), where the 
result for the LUTONIX[supreg] treatment group was 76.2 percent 
compared to 66.6 percent in the control group with a p-value of 0.041. 
Clinical indicators, such as Ankle brachial index (ABI), Rutherford 
scores (categorization of symptomology), quality of life (QOL), walking 
distance, and walking impairment WIQ, were significantly improved with 
a p-value of <0.001. The applicant assessed the primary safety endpoint 
using Kaplan-Meier survival analysis and stated that there was no 
evidence of statistical difference.
    We are concerned that the patient population studied may not 
reflect the Medicare population. In particular, we note that only 37 
percent of the studied patients were female. For instance, it could be 
beneficial to see additional subgroup analyses to test for statistical 
interaction between treatment and subgroups to ascertain that there is 
no imbalance in response to different subpopulations, such as males 
versus females.
    With regard to substantial clinical improvement for the 
IN.PACTTM AdmiralTM, the applicant stated that 
evidence demonstrates that the technology significantly improves key 
clinical outcomes compared to previous technologies for patients with 
intermittent claudication. Examples of such key clinical outcomes 
included a decrease in recurrence of restenosis (disease process); a 
decrease in rates of repeat interventions (subsequent therapeutic 
interventions); a decrease in future hospitalizations; improved patient 
symptoms (decreased pain), and improvement in quality of life and 
function. To further demonstrate substantial clinical improvement, the 
applicant asserted that historical proof-of-concept research has 
demonstrated the utility of various drug-coated balloon technologies in 
reducing restenosis and reintervention compared

[[Page 24451]]

with PTA.41 42 With this assertion, the applicant stated 
that there was no evidence of the promising primary patency and target 
lesion revascularization rates from large randomized controlled trials. 
This led the applicant to design the IN.PACTTM SFA Trial. 
The IN.PACTTM SFA Trial is a prospective, randomized-
controlled, global, multicenter, single-blinded study conducted with 
independent, blinded adjudication of all key endpoints. The primary 
safety end point was freedom from device-related and procedure-related 
death through 30 days, and freedom from target limb major amputation 
and clinically-driven TVR through 12 months. The primary effectiveness 
endpoint was primary patency, a composite endpoint comprising an 
anatomic measure (binary restenosis as measured by duplex ultrasound or 
angiography) and a clinical measure (Clinically Driven Target Lesion 
Revascularization (CD-TLR)). The IN.PACTTM SFA Trial was 
designed as a two-phase, global, multicenter trial in which 331 
patients with symptoms of claudication or rest pain and with a positive 
diagnostic finding of de novo stenosis and/or non-stented restenotic 
lesions in the SFA and/or popliteal artery (PPA) were randomized in a 
2:1 fashion to treatment with IN.PACTTM Admiral 
TM drug-coated balloon or uncoated balloon angioplasty. The 
trial was prospectively designed to be conducted in two phases: 
IN.PACTTM SFA Phase I (conducted in Europe) and 
IN.PACTTM SFA Phase II (conducted in the United States), 
jointly referred to as IN.PACTTM SFA Trial. According to the 
applicant, the patient demographics were well-matched and of which 34 
percent were women. We are concerned that the applicant did not match 
the gender variable. The applicant noted that, during the SFA Trial, 
both the study subjects and trial sponsor were blinded to the treatment 
assignments through completion of the 12-month primary endpoint 
evaluations. The applicant also stated that the independent Clinical 
Events Committee and the Core Laboratories were blinded to the 
treatment assignment and the duration of the follow-up of study 
participants. In addition, operators (implanting physicians and 
catheterization laboratory staff, including research coordinators) were 
not blinded to the treatment delivered due to macroscopic visual 
differences between IN.PACTTM AdmiralTM drug-
coated balloon and control technology.
---------------------------------------------------------------------------

    \41\ Werk M, Albrecht T, Meyer DR, Ahmed MN, Behne A, Dietz U, 
Eschenbach G, Hartmann H, Lange C, Schnorr B, Stiepani H, Zoccai GB, 
H[auml]nninen EL.: Paclitaxel-coated balloons reduce restenosis 
after femoropopliteal angioplasty: evidence from the randomized 
PACIFIER trial. Circ Cardiovasc Interv 2012 5: 831-40.
    \42\ Tepe G, Zeller T, Albrecht T, Heller S, Schwarzw[auml]lder 
U, Beregi JP, Claussen CD, Oldenburg A, Scheller B, Speck U.: Local 
delivery of paclitaxel to inhibit restenosis during angioplasty of 
the leg. N Engl J Med 2008; 358: 689-99.
---------------------------------------------------------------------------

    The applicant reported the following: The primary endpoints were: 
Improved primary patency rates in the IN.PACTTM 
AdmiralTM drug-coated balloon arm compared to the control 
arm; and primary patency within 12 months is defined as freedom from 
clinically driven target lesion revascularization and freedom from 
restenosis as determined by duplex ultrasonography peak systolic 
velocity ratio <=2.4 or <=50 percent stenosis as assessed by 
angiography. Results showed that the 12-month primary patency rate was 
82.2 percent in the IN.PACTTM AdmiralTM drug-
coated balloon arm versus 52.4 percent in the PTA arm (P <0.001). In 
addition, the 12-month freedom from binary restenosis (assessed by DUS/
angiography) was 83.5 percent in the IN.PACTTM 
AdmiralTM drug-coated balloon group compared to 66.3 percent 
in the PTA group (P = 0.001). The second endpoint measured was Ankle-
Brachial Index (ABI) showing 0.951 in the IN.PACTTM 
AdmiralTM drug-coated balloon arm compared to 0.866 in the 
control arm, P = 0.002. The ABI is an objective hemodynamic measure 
used to predict the severity of PAD in the lower extremity. The test is 
done by comparing the systolic blood pressure at the ankle and the 
systolic blood pressure in the arm while a person is at rest. In 
general, higher values are better than lower values; a normal resting 
ankle-brachial index is from 1.0 to 1.4, an abnormal resting ankle-
brachial index is 0.9 or lower and an ABI of 0.91 to 0.99 is considered 
borderline abnormal.\43\ Secondary endpoints were primary sustained 
clinical improvement, defined as freedom from target limb amputation, 
target vessel revascularization, and increase in Rutherford class; 
comparing IN.PACTTM AdmiralTM with the control 
arm was 85.2 percent versus 68.9 percent; P <0.001. The rate of repeat 
target lesion revascularization (TLR), defined by the applicant as 
repeat revascularization of the target lesion by percutaneous 
endovascular treatment or bypass surgery, was 2.4 percent in the 
IN.PACTTM AdmiralTM drug-coated balloon arm 
compared to 20.6 percent in the control arm. In addition, the target 
vessel revascularization (TVR) procedures (that is, any 
revascularization done to any segment of the entire target vessel that 
may reflect restenosis of a target lesion or disease progression 
causing a new lesion in the target artery) \44\ was 4.3 percent in the 
IN.PACTTM AdmiralTM drug-coated balloon arm 
compared to 23.4 percent in the control arm with a p-value of <0.001).
---------------------------------------------------------------------------

    \43\ Hirsch AT, Haskal ZJ, Hertzner NR, et al.: ACC/AHA 
guidelines for the management of subjects with peripheral arterial 
disease (lower extremity, renal, mesenteric, and abdominal aorta): 
executive summary. J Am Coll Cardiol 2006;47:1239-312.
    \44\ Werk M, Langner S, Reinkensmeier B, Boettcher HF, Tepe G, 
Dietz U, Hosten N, Hamm B, Speck U, Ricke J.: Inhibition of 
restenosis in femoropopliteal arteries: paclitaxel-coated versus 
uncoated balloon: femoral paclitaxel randomized pilot trial. 
Circulation 2008;118: 1358-65.
---------------------------------------------------------------------------

    Other secondary endpoints were conducted and the patients were 
followed at 1, 6, and 12 months to assess the following claudication 
symptoms: EQ-5D; Walking Impairment Questionnaire (WIQ); 6-minute walk 
test in a subset. Claudication symptoms were 7.3 percent in the 
IN.PACTTM AdmiralTM drug-coated balloon arm 
compared to 20.7 percent in the control arm. For WIQ (defined as the 
ability of PAD patients to walk defined distances and speeds, plus 
climb stairs, thus evaluating claudication severity levels \45\), the 
gains in improvement were similar in both groups. The 6-minute walk 
test, which is a measure of functional exercise capacity, was equivocal 
in both arms. Quality of life (QOL) was measured using five domains of 
the EQ-5D (mobility, self-care, usual activities, pain/discomfort, and 
anxiety/depression) and was found to be equivocal.
---------------------------------------------------------------------------

    \45\ Jones WS, Schmit KM, Vemulapalli S, Subherwal S, Patel MR, 
Hasselblad V, Heidenfelder BL, Chobot MM, Posey R, Wing L, Sanders 
GD, Dolor RJ.: Treatment Strategies for Patients With Peripheral 
Artery Disease. Comparative Effectiveness Review No. 118. (Prepared 
by the Duke Evidence-based Practice Center under Contract No. 290-
2007-10066-I.) AHRQ Publication No. 13-EHC090-EF. Rockville, MD: 
Agency for Healthcare Research and Quality; May 2013. Available at: 
http://www.effectivehealthcare.ahrq.gov/reports/final.
_____________________________________-

    The applicant also conducted extensive subgroup analyses of the 
primary safety end point, efficacy endpoint, and TLR rates to assess 
the response to IN.PACTTM AdmiralTM in various 
subpopulations, including: Rutherford category (2, 3, and 4); diabetes; 
age (>=75); lesion length (<5 cm, >=5 cm to <10 cm, >=10 cm to <18 cm); 
total occlusion, and gender. According to the applicant, although the 
trial was not designed to power the subgroup analyses, in 9 of these 11 
subgroups, patients in the IN.PACTTM AdmiralTM 
treatment group were shown to have statistically significant better 
outcomes than patients in the PTA control group

[[Page 24452]]

in the primary effectiveness and safety endpoints as well as 
clinically-driven TLR. This includes subgroups: Rutherford categories 2 
& 3; diabetes; age (>=75); lesion length >=5 cm to <10 cm; lesion 
length >=10 cm to <18 cm; total occlusion; and gender (both male and 
female). In the two subgroups that did not meet statistical 
significance (Rutherford category 4 and lesion length <5 cm), data for 
the primary effectiveness and safety endpoints as well as the 
clinically driven TLR trended in favor of IN.PACTTM 
AdmiralTM.
    We are concerned about the clinical meaningfulness of some of the 
endpoints measured by the trials conducted by the applicant. For 
example, there were no changes in functional measures such as walking 
distances. The applicant indicated that this may be because patients in 
the control group had additional procedures to the point their symptoms 
were controlled to the same extent as those of the drug-coated balloon 
group. We believe that this assertion could be better supported with 
data. Another related example is the higher ankle-brachial index in the 
drug-coated balloon catheter group. While this is also consistent with 
an enduring physiologic effect of the drug-coated balloon device, we 
are concerned that these ABI measurements appear to have been made by 
unblinded study personnel.
    We are concerned that the IN.PACTTM AdmiralTM 
technology may not be the optimal treatment for all patients diagnosed 
with peripheral arterial disease. The drug-coated balloon catheter has 
been compared only with a standard balloon, and no other alternatives, 
such as stents, surgery, or intensive exercise therapy. Therefore, it 
is unknown whether a drug-coated balloon strategy would yield the same, 
better, or worse outcomes than these alternatives. We also note that 
while there appears to be broader anatomical applicability, not all of 
the studies provided definitively indicate that it is a clinical 
improvement over PTA.
    We are seeking public comment on whether LUTONIX[supreg] and 
IN.PACTTM AdmiralTM meet the substantial clinical 
improvement criterion, specifically with regard to our concerns 
discussed.
    Below we summarize the written public comments on the 
LUTONIX[supreg] and IN.PACTTM AdmiralTM 
technologies that we received in response to the town hall meeting.
    Comment: One commenter, a major society on vascular medicine, 
stated that without new technology add-on payments for drug-coated 
balloon catheters, facilities will not be adequately compensated for 
procedures involving these devices and patient access to these new 
beneficial technologies will be hampered. The commenter believed that 
the technology being developed by both manufacturers meets the newness 
criterion. The commenter stated that the drug-coated balloon catheters 
represent advancement in medical technology that substantially 
improves, relative to technologies previously available, the treatment 
of Medicare beneficiaries. Specifically, the commenter stated that the 
results of the clinical trials for these devices have established that 
these devices achieve more durable patency by reducing restenosis, 
which in turn reduces the rate of repeat interventions. The commenter 
further stated that these devices do not require a permanent implant, 
which preserves future treatment options. The commenter also noted 
documented improvements treatment results for patients diagnosed with 
PAD according to an article in the JAMA.\46\ The commenter expressed 
support for approval of new technology add-on payments for both the 
LUTONIX[supreg] and the IN.PACTTM AdmiralTM 
technologies, with hopes of minimizing any financial barriers that 
might prevent patients from having access to this technology.
---------------------------------------------------------------------------

    \46\ Goodney, Tarulli, Faerber, et al. Fifteen-Year Trends in 
Lower Limb Amputation, Revascularization, and Preventive Measures 
Among Medicare Patients. JAMA Surg. 2015;150(1):84-86.
---------------------------------------------------------------------------

    Another commenter supported the approval of new technology add-on 
payments for the LUTONIX[supreg] and IN.PACTTM 
AdmiralTM technologies and for other drug-coated balloon 
catheters in the treatment of patients diagnosed with SFA in the United 
States. Specifically, the commenter stated that the clinical study 
results have shown that using drug-coated balloon catheters both keep a 
vessel open for a longer period of time and reduce the total number of 
repeat procedures that may need to be performed. The commenter further 
stated that treatment using existing therapies in his own practice have 
resulted in patients returning for repeat procedures 1 to 2 times per 
year. The commenter noted that the additional benefit of reducing 
revascularization, which allows patients to remain mobile for longer 
periods of time, further reduces potential complications and 
hospitalizations.
    The commenter also noted that colleagues outside the United States 
have had access to this technology for over 5 years and the 
technology's use has shown positive results in different patient and 
lesion subgroups, which provides strong evidence that supports the wide 
use of drug-coated balloon catheters. The commenter stated that there 
are a number of publications that advocate that the reduced need for 
revascularization also results in significant cost savings for health 
care systems, and recommended that these additional savings and value 
to be shared with hospitals in the United States. The commenter stated 
that, although there is clear clinical evidence that supports the use 
of drug-coated balloon catheters, there are concerns that hospital 
administrators may limit the use of these catheters because of the 
added cost burden that would be completely imposed on hospitals in the 
current health care system.
    Response: We appreciate the commenters' input. We will consider 
these comments in our analysis and final determination of the 
applications for new technology add-on payments for FY 2016.
h. VERASENSETM Knee Balancer System (VKS)
    OrthoSensor submitted an application for new technology add-on 
payments for the VERASENSETM Knee Balancer System (VKS) for 
FY 2016. The VKS is a sterile, single patient use device to 
intraoperatively provide a means to dynamically balance the patient's 
knee during total knee arthroplasty (TKA) surgery. The applicant 
maintained that quantitative metrics, viewed on a monitor through real 
time wireless information, enable the surgeon to improve soft tissue 
stability and kinetics during TKA surgery. The VKS device includes a 
tibial trial insert composed of an array of responsive sensors that 
delivers quantified kinetic balance data during TKA surgery. The 
quantitative data provides a basis for the surgeon to make data-based 
decisions regarding tissue dissection during TKA surgeries, resulting 
in a more stable outcome.
    According to the applicant, the VKS device combines dual sensor 
elements, coupled with micro-processing technology, to accurately 
depict intra-articular kinetics and contact point locations within the 
knee. The tibial trial insert is placed in the knee capsule. Proper 
placement of the insert does not require any force or infiltration of 
the bone or soft tissue in the knee. The applicant stated that the VKS 
device uses wireless communication protocols that overcome line-of-
sight or other interference issues, therefore eliminating the need for 
line-of-sight or direct antenna-based tracking during the TKA surgery.

[[Page 24453]]

    The first version of the VKS received FDA approval in 2009 for the 
OrthoRex Intra-Operative Load Sensor. The device was indicated for use 
as a tool to adjust the femoral knee implant to reduce instability from 
flexion gap asymmetry using a single patient use sterile force sensor. 
The applicant noted that the first version of the VKS was not available 
on the U.S. market at the time of FDA approval in 2009. The applicant 
stated that the 510K approval from the FDA allowed permission to 
continue to test the device and improve upon the specificity of the 
sensors. The applicant stated that the first version of the VKS did not 
enter on the U.S. market until late 2011. Further advancements were 
made to the VKS to more accurately refine the sensor specificity, which 
provides more accurate balance data unique to the contours of specific 
knee implant components. The applicant further explained that the 
tibial trial sensor was redesigned to respond quantitatively and 
specifically to the variations of the contours of specifically 
manufactured knee implants. The advanced sensor specificity, developed 
in conjunction with data gained from clinical trials, provides 
information regarding force and balance metrics that aid the surgeon's 
understanding and measurement of knee balance. The applicant noted that 
without the advancements to the sensor specificity, which were 
perfected based on knowledge gained from the clinical trials, the 
sensor would not be as clinically useful as it is currently. These 
advancements resulted in additional FDA clearances on June 13, 2013, 
and October 14, 2013. The product's description was updated on January 
28, 2014.
    The applicant maintained that the VKS meets the newness criterion. 
The applicant analyzed the relative weights from 2010 to 2014 for the 
MS-DRGs that may contain cases that would be eligible for the advanced 
VKS technology (MS-DRGs 461 through 470). The applicant noted that 
there was no increase in the calculation of the FY 2014 or FY 2015 
relative weights for these MS-DRGs to represent the additional cost of 
the advanced VKS technology.
    We are concerned that the advancements made to the VKS that 
resulted in the additional FDA approval clearances in 2013 may not be 
significant enough to distinguish the advanced technology from the 
first version of the VKS, which received FDA approval in 2009. We 
believe that the advanced VKS may be substantially similar to the first 
version of the VKS (that was first available on the U.S. market in late 
2011) and, therefore, would not meet the newness criterion. In 
addition, the costs associated with the VKS should be reflected in the 
FY 2013 and subsequent relative payment weights for these MS-DRGs 
because the product has been available and used for the Medicare 
population since 2011.
    In the FY 2010 IPPS/RY 2010 LTCH PPS final rule (74 FR 43813 
through 43814), we established criteria for evaluating whether a new 
technology is substantially similar to an existing technology, 
specifically: (1) Whether a product uses the same or a similar 
mechanism of action to achieve a therapeutic outcome; (2) whether a 
product is assigned to the same or a different MS-DRG; and (3) whether 
the new use of the technology involves the treatment of the same or 
similar type of disease and the same or similar patient population. If 
a technology meets all three of the criteria, it would be considered 
substantially similar to an existing technology and would not be 
considered ``new'' for purposes of new technology add-on payments.
    In evaluating the application under the substantial similarity 
criteria, we believe that the first version of the VKS and the advance 
version of the VKS use the same mechanism of action to achieve the 
desired outcome by using a sterile device that is equipped with sensors 
used to adjust the femoral knee implant to reduce instability from 
flexion gap asymmetry. In addition, we believe that cases involving the 
first version of the VKS would be assigned to the same MS-DRG as the 
cases involving the advanced VKS. Moreover, we believe that both the 
first version of the VKS and the advanced version of the VKS treat the 
same or similar disease and the same or similar patient population. 
Specifically, both of the VKS technologies are used in the treatment of 
patients undergoing TKA surgery. Because we believe that the technology 
meets all three of the substantial similarity criteria, we believe that 
the beginning of the newness period for this technology would commence 
when it became available on the U.S. market in late 2011. Therefore, 
the VKS may not be considered ``new'' for purposes of new technology 
add-on payments.
    As discussed in the FY 2005 IPPS final rule (69 FR 49003), once 
data become available to reflect the cost of the technology in the 
relative weights, the technology can no longer be considered ``new'' 
and eligible to receive new technology add-on payments. Section 
412.87(b)(2) states that a medical service or technology may be 
considered new within 2 or 3 years after the point at which data begin 
to become available reflecting the ICD-9-CM code assigned to the new 
service or technology (depending on when a new code is assigned and 
data on the new service or technology become available for DRG 
recalibration). Further, after CMS has recalibrated the DRGs, based on 
available data, to reflect the costs of an otherwise new medical 
service or technology, the medical service or technology will no longer 
be considered ``new'' under the criterion of this section. Therefore, 
we believe that the costs of this technology are included in the charge 
data and the MS-DRGs have been recalibrated using that data. Therefore, 
the technology can no longer be considered ``new'' for the purposes of 
this provision, regardless of whether or not there was an increase in 
the MS-DRG relative weights during FYs 2014 and 2015, specifically 
because of the inclusion of the cost of the technology.
    As previously stated, we believe that the beginning of the newness 
period for the VKS commenced when the product was first made available 
on the U.S. market in late 2011. The 3-year anniversary date of the 
product's availability on the U.S. market occurred in late 2014, which 
is prior to the beginning of FY 2016. Therefore, we do not believe that 
the VKS technology can be considered ``new'' for purposes of new 
technology add-on payments. We are inviting public comments regarding 
whether or not the VKS technology is substantially similar to existing 
technologies, and whether or not the VKS technology meets the newness 
criterion.
    Currently, there are no ICD-9-CM or ICD-10-PCS procedure codes that 
uniquely identify the use of this technology. As stated above, 
effective October 1, 2015 (FY 2016), the ICD-10 coding system will be 
implemented. The applicant submitted a request for a unique ICD-10-PCS 
code that was presented at the March 18, 2015 ICD-10 Coordination and 
Maintenance Committee meeting. If approved, the code(s) will be 
effective on October 1, 2015 (FY 2016). More information on this 
request can be found on the CMS Web site located at the following link: 
http://www.cms.gov/Medicare/Coding/ICD9ProviderDiagnosticCodes/ICD-9-CM-C-and-M-Meeting-Materials.html.
    With regard to the cost criterion, the applicant supplied three 
analyses to demonstrate that it meets the cost criterion. The applicant 
believed that cases that are eligible for the VKS technology map to MS-
DRGs 461 and 462 (Bilateral or Multiple Major Joint Procedures of Lower 
Extremity with MCC and without MCC, respectively), MS-DRGs 466 through 
468 (Revision of

[[Page 24454]]

Hip or Knee replacement with MCC, with CC, and without CC/MCC, 
respectively), and MS-DRGs 469 and 470 (Major Joint Replacement or 
Reattachment of Lower Extremity with MCC and without MCC, 
respectively). The first analysis used data from the 2012 National 
Inpatient Sample (NIS) from the Agency for Research and Quality (AHRQ). 
We note that the NIS includes Medicare, Medicaid, and commercial and 
uninsured claims data. However, the applicant limited its search to 
Medicare cases only.
    The applicant searched for all Medicare cases assigned to MS-DRGs 
461 and 462 and found 812 and 14,200 cases respectively (for a total of 
15,012 cases). The applicant noted that the 15,012 cases assigned to 
MS-DRGs 461 and 462 also include cases representing hip revision 
procedures. Therefore, to determine the number of eligible cases 
reporting bilateral knee revisions assigned to MS-DRGs 461 and 462, 
based on clinical information,\47\ the applicant approximated that 4 
percent of the cases assigned to MS-DRGs 461 and 462 represent Medicare 
beneficiaries who may be eligible for the VKS for a bilateral knee 
revision procedure. As a result, the applicant focused its analysis on 
32 cases assigned to MS-DRG 461 (812 cases * .04), and 568 cases 
assigned to MS-DRG 462 (14,200 cases * .04). We are concerned that the 
statistical data obtained from clinical information that the applicant 
used to determine the percentage of cases representing bilateral knee 
revisions still includes cases representing hip revision procedures. 
Specifically, the applicant did not uniquely identify cases 
representing bilateral knee revisions and only produced a percentage of 
all cases that still includes cases for hip revision procedures.
---------------------------------------------------------------------------

    \47\ Memtsoudis SG, Valle AGD, Besculides MC, Gaber, Sculco TP.: 
In-hospital complications and mortality of unilateral, bilateral, 
and revision TKA. 2008, Clin Orthop Relat Res, 466:2617-2627.
---------------------------------------------------------------------------

    According to the applicant, eligible cases for the VKS technology 
include cases representing knee revision procedures that also map to 
MS-DRGs 466 through 468 (which represent degrees of severity calculated 
for each MS-DRG). To determine the number of eligible cases reporting 
knee revision procedures assigned to MS-DRGs 466 through 468, the 
applicant first searched the NIS database for the total number of 
Medicare cases assigned to these MS-DRGs. This resulted in a total of 
54,105 cases. The applicant noted that MS-DRGs 466 through 468 also 
include cases for hip and knee revision procedures. Therefore, to 
determine the number of cases representing knee revision procedures in 
each of these three MS-DRGs, the applicant first divided the number of 
Medicare cases for each MS-DRG (5,195 for MS-DRG 466, 28,650 for MS-DRG 
467, and 20,260 for MS-DRG 468) by the total number of Medicare cases 
assigned to MS-DRGs 466, 467, and 468 (54,105). The applicant then 
multiplied the percentage for each MS-DRG (9.6 percent for MS-DRG 466, 
52.9 percent for MS-DRG 467, and 37.4 percent for MS-DRG 468) by the 
total amount of cases assigned to each MS-DRG. Based on this 
calculation, the applicant approximated the following number of cases 
representing knee revision procedures assigned to each of these three 
MS-DRGs: 3,054 cases in MS-DRG 466; 16,842 in MS-DRG 467; and 11,910 in 
MS-DRG 468. We are concerned that the methodology the applicant used to 
determine the percentage of cases representing knee revision procedures 
still includes cases representing hip revision procedures. 
Specifically, in its methodology, the applicant did not use any source 
of statistical relevance to isolate cases representing knee revision 
procedures. Rather, the applicant used the percentage of Medicare cases 
assigned to each MS-DRG of the overall total cases for the three MS-
DRGs, which includes knee and hip revisions, and multiplied by this 
percentage to further reduce the total number of cases. We do not 
believe that this further reduction to the total number of Medicare 
cases has sufficiently isolated cases representing knee revision 
procedures.
    According to the applicant, eligible cases for the VKS technology 
also include TKA procedures that map to MS-DRGs 469 and 470. To 
determine the number of eligible cases reporting TKA procedures 
assigned to MS-DRGs 469 and 470, the applicant first searched the NIS 
database for the total number of Medicare cases assigned to these MS-
DRGs. This resulted in 35,740 cases in MS-DRG 469 and 547,955 cases in 
MS-DRG 470. The applicant noted that MS-DRGs 469 and 470 also include 
cases representing hip replacement and other joint replacement 
procedures. Therefore, in order to determine the number of TKA 
procedures within these MS-DRGs, the applicant searched the NIS 
database for cases reporting ICD-9-CM procedure codes that typically 
map to these MS-DRGs. The applicant first searched for cases 
representing TKA across all MS-DRGs that reported ICD-9-CM procedure 
code 81.54 (Total knee replacement) and found 336,050 cases. The 
applicant then searched the NIS database for cases representing hip and 
other joint replacement procedures across all MS-DRGs that reported 
ICD-9-CM procedure codes 81.51 (Total hip replacement), 81.52 (Partial 
hip replacement), 81.56 (Total ankle replacement), 81.57 (Replacement 
of joint of foot and toe), and 81.59 (Revision of joint replacement of 
lower extremity, not elsewhere classified) and found 238,050 cases. 
This resulted in a total of 574,100 cases representing knee, hip, and 
other joint replacement procedures.
    The applicant then divided the number of cases representing TKA 
procedures by the total number of cases (336,050/574,100) and 
determined that 58.5 percent of all cases assigned to MS-DRGs 469 and 
470 are related to TKA procedures. The applicant then multiplied the 
percent of cases representing TKA procedures (58.5 percent) by the 
number of cases assigned to MS-DRGs 469 and 470, which resulted in 
20,920 cases in MS-DRG 469 (35,740 * .585) and 320,746 cases in MS-DRG 
470 (547,955 * .585). We are concerned that the methodology the 
applicant used to determine the percentage of cases representing TKA 
procedures still includes cases representing hip and other joint 
replacement procedures. Specifically, the applicant did not uniquely 
identify cases representing TKA procedures and only produced a 
percentage of all cases, which still includes cases representing hip 
and other joint replacement procedures.
    Based on the analysis above, the applicant maintained that the 
total number of cases across MS-DRGs 461 and 462 and MS-DRGs 466 
through 470 was 374,071. The applicant determined an average case-
weighted charge per case of $57,341. The applicant then determined that 
it was necessary to remove charges related to the other computer-
assisted devices/technologies used during these procedures and charges 
for operating room time because procedures involving the VKS do not 
require operating room time, and the charges for the VKS technology 
would inevitably be different. Therefore, the applicant removed 
approximately $146 from the average case-weighted charge per care for 
cases assigned to MS-DRGs 461 and 462, and $73 from the average case-
weighted charge per case for cases assigned to MS-DRGs 466 through 470. 
The applicant noted that the $146 in charges removed from the average 
case-weighted charges per case for cases assigned to MS-DRGs 461 and 
462 was slightly higher than the charges removed from cases assigned to 
MS-

[[Page 24455]]

DRGs 466 through 470 because these charges were for bilateral 
procedures which require additional operating room time.
    Data from the NIS database is only available on a national level 
and not on a hospital-specific level. Therefore, in order to 
standardize the charges per case, the applicant used the FY 2012 IPPS 
Impact File and the mean value of all relevant standardization factors 
to standardize the charges per case. We are concerned that the analysis 
provided by the applicant did not use hospital-specific data and, 
therefore, the standardization process may be inaccurate because of the 
use of mean factors rather than hospital-specific factors. By using 
mean factors rather than hospital-specific factors, we believe that the 
standardization performed by the applicant does not sufficiently take 
into account hospital variations.
    The applicant then inflated the charges using an inflation factor 
of 10.4227 percent based on the inflation factor in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50379), and added the charges related to the 
VKS technology to the adjusted average case-weighted standardized 
charge per case. This resulted in a final inflated average case-
weighted standardized charge per case of $68,121. Using the FY 2015 
IPPS Table 10 thresholds, the applicant determined that average case-
weighted threshold amount for MS-DRGs 461 and 462 and MS-DRGs 466 
through 470 is $57,341. Because the final inflated average case-
weighted standardized charge per case for the applicable MS-DRGs 
exceeds the average case-weighted threshold amount, the applicant 
maintained that the technology meets the cost criterion.
    The applicant's second analysis used data from the 2013 American 
Hospital Discharge Data (AHD) based on 57 randomly selected hospitals. 
The applicant searched the data and did not find any cases assigned to 
MS-DRG 461. The applicant noted that it used a value of 10 cases for 
its analysis of cases assigned to MS-DRG 461 because data reflecting a 
zero value indicates that the hospital performed less than 10 
procedures. The applicant found 533 cases assigned to MS-DRG 462. To 
determine the number of cases representing bilateral knee revision 
procedures in MS-DRG 462, similar to the first analysis, the applicant 
multiplied the total number of cases assigned to MS-DRG 462 by 4 
percent, which resulted in 21 cases. Similar to our statement about the 
first analysis, we are concerned that the applicant did not uniquely 
identify cases representing bilateral knee revision procedures and only 
produced a percentage of all cases, which still includes cases 
representing hip revision procedures.
    To determine the number of eligible cases reporting knee revision 
procedures assigned to MS-DRGs 466 through 468, the applicant first 
searched the AHD database for the total number of cases assigned to 
these MS-DRGs. This resulted in a total of 2,969 cases. Because these 
MS-DRGs include cases representing hip and knee revision procedures, to 
determine the number of cases representing knee revision procedures in 
each of these three MS-DRGs, the applicant first divided the number of 
cases for each MS-DRG (122 for MS-DRG 466; 1,746 for MS-DRG 467; and 
1,101 for MS-DRG 468) by the total number of cases in MS-DRGs 466 
through 468 (2,969). The applicant then multiplied the percentage for 
each MS-DRG (4.1 percent for MS-DRG 466; 58.8 percent for MS-DRG 467; 
and 37.1 percent for MS-DRG 468) by the total number of cases in each 
MS-DRG. Based on this calculation, the applicant approximated the 
following number of cases representing knee revision procedures in each 
of these three MS-DRGs: 1,307 cases in MS-DRG 466; 18,704 in MS-DRG 
467; and 11,794 in MS-DRG 468. Similar to our concerns about the first 
analysis, we are concerned that the methodology the applicant used to 
determine the percentage of cases of knee revision procedures still 
includes cases representing hip revision procedures. Specifically, in 
its methodology, the applicant did not use any source of statistical 
relevance to isolate cases representing knee revision procedures. The 
applicant simply used the percentage of Medicare cases for each MS-DRG 
of the overall total cases for the three MS-DRGs, which include knee 
and hip revision procedures, and multiplied by this percentage to 
further reduce the number of cases. We do not believe that this further 
reduction to the total number of Medicare cases has isolated cases 
representing knee revision procedures.
    The applicant used the same methodology from the first analysis to 
determine the number of eligible cases representing TKA procedures 
assigned to MS-DRGs 469 and 470. The applicant searched the AHD 
database and found 1,217 cases assigned to MS-DRG 469 and 24,620 cases 
assigned to MS-DRG 470. To determine the number of cases representing 
TKA procedures within these MS-DRGs, the applicant multiplied the total 
number of cases within these MS-DRGs by the percentage of 58.5 percent 
from the NIS database, which represents the percentage of knee 
replacement procedure cases among the total number of cases 
representing knee, hip and joint replacement procedures. This resulted 
in 712 cases in MS-DRG 469 (1,217 * .585) and 14,411 cases in MS-DRG 
470 (24,620 * .585). Similar to our concerns expressed earlier, we are 
concerned that the methodology the applicant used to determine the 
percentage of cases representing TKA procedures still includes cases 
representing hip replacement and other joint replacement procedures. 
Specifically, the applicant did not uniquely identify cases 
representing TKA procedures and only produced a percentage of all 
cases, which still includes cases representing hip and other joint 
replacement procedures.
    Based on this analysis, the applicant maintained that the total 
number of cases across MS-DRGs 461 and 462 and MS-DRGs 466 and 470 was 
46,960. The applicant determined an average case-weighted charge per 
case of $80,702. For the rest of the analysis, the applicant followed 
the same methodology as the first analysis. The applicant removed $146 
from the average case-weighed charge per case for cases assigned to MS-
DRGs 461 and 462 and $73 from the average case-weighted charge per case 
for cases assigned to MS-DRGs 466 through 470 for charges related to 
other computer-assisted devices/technologies used during these 
procedures and additional charges for the use of the operating room.
    Similar to the first analysis, the applicant used the FY 2012 IPPS 
impact file and the mean value of all relevant standardization factors 
from all hospitals to standardize the charges per case. Similar to 
above, we are concerned that the analysis provided by the applicant did 
not use hospital-specific data and, therefore, the standardization 
process may be inaccurate because of the use of mean factors rather 
than hospital-specific factors. By using mean factors rather than 
hospital-specific factors, the standardization performed by the 
applicant does not sufficiently take into account hospital variations.
    The applicant then inflated the charges using an inflation factor 
of 10.4227 percent based on the inflation factor in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50379), and added the charges related to the 
VKS technology to the adjusted average case-weighted standardized 
charge per case. This resulted in a final inflated average case-
weighted standardized charge per case of $90,515. Using the FY 2015 
IPPS Table 10 thresholds, the applicant determined that the average 
case-

[[Page 24456]]

weighted threshold amount for MS-DRGs 461 and 462 and MS-DRGs 466 
through 470 is $80,699. Because the final inflated average case-
weighted standardized charge per case exceeded the average case-
weighted threshold amount for the applicable MS-DRGs, the applicant 
maintained that the VKS technology meets the cost criterion.
    The applicant's third analysis used data from the FY 2015 CMS 
Before Outliers Removed (BOR) file. The BOR file contained 469 cases in 
MS-DRG 461 and 9,396 cases in MS-DRG 462. To determine the number of 
cases representing bilateral knee revision procedures assigned to MS-
DRGs 461 and 462, similar to the first analysis, the applicant used an 
assumption of 4 percent, which resulted in 19 cases in MS-DRG 461 and 
376 cases in MS-DRG 462. Similar to our concerns stated earlier, we are 
concerned that the applicant did not uniquely identify cases 
representing bilateral knee revision procedures and only produced a 
percentage of all cases, which still includes cases representing hip 
revision procedures.
    To determine the number of eligible cases reporting knee revision 
procedures assigned to MS-DRGs 466 through 468, the applicant again 
analyzed the BOR file which contained a total of 44,420 cases. Similar 
to first two analyses, because these MS-DRGs include cases representing 
hip and knee revision procedures, to determine the number of cases 
representing knee revision procedures in each of these three MS-DRGs, 
the applicant first divided the number of cases for each MS-DRG (4,202 
for MS-DRG 466; 23,390 for MS-DRG 467; and 16,828 for MS-DRG 468) by 
the total number of cases in MS-DRGs 466 through 468 (44,420). The 
applicant then multiplied the percentage for each MS-DRG (9.5 percent 
for MS-DRG 466; 52.7 percent for MS-DRG 467; and 37.9 percent for MS-
DRG 468) by the total number of cases in each MS-DRG. Based on this 
calculation, the applicant approximated the following number of cases 
representing knee revision procedures in each of these three MS-DRGs: 
3,009 cases in MS-DRG 466; 16,747 in MS-DRG 467; and 12,049 in MS-DRG 
468. Similar to our concerns stated earlier, we are concerned that the 
methodology the applicant used to determine the percentage of cases 
representing knee revision procedures still includes cases representing 
hip revision procedures. Specifically, in its methodology, the 
applicant did not use any source of statistical relevance to isolate 
cases representing knee revision procedures. Rather, the applicant used 
the percentage of Medicare cases for each MS-DRG of the overall total 
number of cases for the three MS-DRGs, which includes cases 
representing knee and hip revision procedures, and multiplied by this 
percentage to further reduce the number of cases. We do not believe 
that this further reduction to the total number of Medicare cases has 
isolated cases representing knee revision procedures.
    The applicant used the same methodology from the first analysis to 
determine the number of eligible cases reporting TKA procedures 
assigned to MS-DRGs 469 and 470. The BOR file contained 27,737 cases in 
MS-DRG 469 and 437,649 cases in MS-DRG 470. To determine the number of 
cases representing TKA procedures within these MS-DRGs, the applicant 
multiplied the total number of cases within these MS-DRGs by the 
percentage of 58.5 percent obtained from the NIS database, which 
represents the percentage of knee replacement cases among the total 
number of cases representing knee, hip, and joint replacement 
procedures. This resulted in 16,236 cases in MS-DRG 469 (27,737 * .585) 
and 256,178 cases in MS-DRG 470 (437,649 * .585). Similar to our 
concerns stated earlier, we are concerned that the methodology the 
applicant used to determine the percentage of cases representing TKA 
procedures still includes cases representing hip and other joint 
replacement procedures. Specifically, the applicant did not uniquely 
identify cases representing TKA procedures and only produced a 
percentage of all cases, which still includes cases representing hip 
and other joint revision procedures.
    Based on this analysis, the applicant maintained that the total 
number of cases across MS-DRGs 461 and 462 and MS-DRGs 466 through 470 
was 304,614. The applicant determined an average case-weighted charge 
per case of $56,282. For the rest of the analysis, the applicant 
followed the same methodology as the first analysis. The applicant then 
removed $146 from the average case-weighted charge per case for cases 
assigned to MS-DRGs 461 and 462 and $73 from the average case-weighted 
charge per case for cases assigned to MS-DRGs 466-470 for charges 
related to other computer-assisted devices/technologies used during 
these procedures and additional charges for the use of the operating 
room.
    Similar to the first analysis, the applicant used the FY 2012 IPPS 
Impact File and the mean value of all relevant standardization factors 
from all hospitals to standardize the charges per case. Similar to our 
concerns stated earlier, we are concerned that the analysis provided by 
the applicant did not use hospital-specific data and, therefore, the 
standardization process may be inaccurate because of the use of mean 
factors rather than hospital-specific factors. By using mean factors 
rather than hospital-specific factors, we believe that the 
standardization performed by the applicant does not sufficiently take 
into account hospital variations.
    The applicant then inflated the charges using an inflation factor 
of 10.4227 percent based on the inflation factor in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50379), and added the charges related to the 
VKS technology to the adjusted average case-weighted standardized 
charge per case. This resulted in a final inflated average case-
weighted standardized charge per case of $66,382. Using the FY 2015 
IPPS Table 10 thresholds, the applicant determined that the average 
case-weighted threshold amount for MS-DRGs 461 and 462 and MS-DRGs 466 
through 470 is $64,280. Because the final inflated average case-
weighted standardized charge per case exceeds the average case-weighted 
threshold amount for the applicable MS-DRGs, the applicant maintained 
that the VKS technology meets the cost criterion.
    Based on the information provided by the applicant, combined with 
the weight of our concerns, we are unable to determine if and how the 
VKS technology meets the cost criterion. We are inviting public 
comments on whether or not the VKS technology meets the cost criterion, 
specifically with regard to the concerns raised.
    With regard to substantial clinical improvement, the applicant 
maintained that the VKS technology represents a substantial clinical 
improvement. The applicant stated that the device offers a treatment 
option for a patient population unresponsive to, or ineligible for, 
currently available treatments. The applicant explained that the use of 
the VKS technology has improved patient outcomes, including rapid 
recovery of patients diagnosed with comorbidities, the early return to 
normal activities, and increased levels of activity and functionality. 
The applicant noted that patients treated using the VKS technology 
during TKA procedures did not experience readmission within 30 days, 
nor was it necessary for the treating physician (the surgeon) to 
complete a problem focused medical evaluation during the patient's 
recovery. The applicant further noted that patients having a more 
favorable immediate outcome with a stable TKA

[[Page 24457]]

were shown to return to normal function more rapidly than patients with 
unbalanced knees. Therefore, the applicant stated that patients with 
complex medical conditions would be able to respond to the early return 
of normal daily living.
    The applicant also believed that the device offers the ability to 
diagnose a medical condition for a patient population experiencing 
medical conditions that are currently undetectable, or offers the 
ability to diagnose a medical condition earlier than that which is 
capable using currently available technologies. The applicant explained 
that the VKS technology provides an improved evaluation/diagnosis 
compared to an unbalanced TKA implant. Specifically, the applicant 
stated that the device enables the surgeon to obtain intraoperative 
measures enabling the surgeon to improve upon the placement of the TKA 
tibial and femoral components. Additionally, intraoperatively the 
device leads to an immediate diagnosis of an implant that can now be 
accurately positioned due to informed fine tissue dissection. The 
applicant stated that the intraoperative technique has been 
demonstrated to result in increased implant stability and functional 
congruence. The applicant cited the following examples of outcomes that 
have been frequently documented and evaluated within clinical studies 
of medical devices:
     Intended to address the leading causes of early implant 
failure in TKA: Instability, malrotation and malalignment;\48\
---------------------------------------------------------------------------

    \48\ Rodriguez-Merchan EC.: Instability Following Total Knee 
Arthroplasty. HSSJ 2011; 7:273-278.
---------------------------------------------------------------------------

     Dynamic intercompartmental load data and Kinetic Tracking 
enables evidence based soft tissue releases to improve stability 
through full ROM;\49\
---------------------------------------------------------------------------

    \49\ Roche MW, Elson LC, Anderson CR.: A Novel Technique Using 
Sensor-Based Technology to Evaluate Tibial Tray Rotation. 
Orthopedics. 2014 (In Press).
---------------------------------------------------------------------------

     Provides intraoperative feedback on tibial-femoral 
component rotation, position of femoral Contact Points and femoral 
roll-back to facilitate optimal component position
     Enables reproducible, teachable surgical technique through 
quantifying surgeon ``feel''; and
     Captures intraoperative data for inclusion in patient EMR, 
registries or comparative effectiveness studies.
    The applicant stated that use of the device significantly improves 
clinical outcomes for a patient population experiencing these types of 
medical procedures when compared to currently available treatments. The 
applicant explained that extensive research and development has 
resulted in the VKS technology demonstrating improved patient outcomes 
in multi-center studies. The applicant further explained that the VKS 
technology has intraoperatively provided a unique opportunity to 
observe the short-term clinical outcomes of patients with a 
quantifiably balanced knee versus those who have quantifiably 
unbalanced knees. According to the applicant, in a multi-center study, 
the use of the VKS technology has been shown to reduce post-operative 
pain and improve activity and patient satisfaction scores with 
statistical significance. Additionally, the applicant stated that 97 
percent of patients whose knees were balanced using the VKS technology 
reported that they were ``satisfied'' to ``very satisfied'' at 1-year 
post-operative compared to 81 percent patient satisfaction after a TKA 
procedure without the use of the VKS technology. The applicant stated 
that the VKS technology provided a 16-percent improvement in patient 
satisfaction for balanced knees; the first significantly notable 
increase of patient-reported satisfaction in over 30 years.\50\
---------------------------------------------------------------------------

    \50\ Gustke KA, et al.: Increased satisfaction after total knee 
replacement using sensor-guided technology. Bone Joint J 2014;96-
B:1333-8.
---------------------------------------------------------------------------

    According to the applicant, the use of the VKS technology avoided 
early implant failure. The applicant explained that considering the 
objective to ameliorate the present risks of revision in TKA 
procedures, the VKS technology has been advanced to address the need 
for improved knee balance through fine tissue dissection using 
information from the VKS technology intelligent tibial trial. While not 
disturbing the surgical flow of TKA procedures, the applicant stated 
that the VKS technology provides the surgeon with data on the dynamic 
intercompartmental load, and kinetic tracking enables evidence-based 
soft tissue releases to improve stability through full ROM.\51\ The 
applicant noted that the results of multi-center studies, using the VKS 
technology intraoperatively, have provided an opportunity to observe 
the short-term clinical outcomes of patients with a quantifiably 
balanced knee versus those who have quantifiably unbalanced knees.
---------------------------------------------------------------------------

    \51\ Gustke, Golladay, et al.: A New Method for Defining 
Balance: Promising Short-Term Clinical Outcomes of Sensor-Guided 
TKA. The Journal of Arthroplasty 25 November 2013 (Article in Press 
DOI: 10.1016/j.arth.2013.10.020)
---------------------------------------------------------------------------

    The applicant further stated that the VKS technology provides 
intraoperative information on tibial-femoral component rotation, 
position of femoral contact points and femoral roll-back to facilitate 
optimal component position. One clinical study \52\ reported 170 
primary TKA procedures where the VKS technology corrected what would 
have resulted in unbalanced and malrotated implants in 53 percent of 
the patients. The applicant noted that when referencing the tibial 
tubercle to maximize tibiofemoral congruency, 53 percent of patients 
exhibited asymmetrical tibiofemoral congruency in extension. The 
applicant further stated that of those patients, 68 percent were shown 
to have excessive internal rotation of the tibial tray relative to the 
femur, while 32 percent exhibited excessive external rotation. 
Additionally, the average tibiofemoral incongruency deviated from a 
neutral position by 6[deg], ranging from 0.5[deg] to 19.2. The 
applicant stated that when comparing the VKS with the convention of 
using the tibial tubercle to maximize tibiofemoral congruency to 
confirm the final rotation of the tibial tray, the VKS technology 
provided superior information. The applicant added that data from using 
the tibial tubercle to maximize tibiofemoral congruency to confirm the 
final rotation of the tibial tray are highly variable and inconsistent 
for confirming the final rotation of the tibial tray.
---------------------------------------------------------------------------

    \52\ Roche MW, Elson LC, Anderson CR: A Novel Technique Using 
Sensor-Based Technology to Evaluate Tibial Tray Rotation. 
Orthopedics. 2015 (In Press)
---------------------------------------------------------------------------

    The applicant stated that the VKS technology has demonstrated and 
resulted in a ``balanced knee'' after TKA procedures with 6 month and 1 
year outcome scores showing a significant improvement over conventional 
or computer-assisted TKA procedures. According to the applicant, by not 
disrupting the surgical flow the VKS technology has been viewed by 
surgeons to provide information enabling them to improve upon the 
balance of the knee, reduce the degree of rotation and only dissect the 
fine tissue as needed sparing the release of the ligaments. The 
applicant further stated that the VKS technology has been shown to 
enable reproducible, teachable surgical technique through quantifying 
surgeon ``feel.''
    The applicant provided patient outcomes at 6 months and believed 
that this demonstrated a significant improvement for the ``balanced 
knee'' TKA procedures using the VKS technology. According to the 
applicant, multivariate binary logistic regression analyses were 
performed for both Knee Society Scores (KSS) and Western Ontario and 
McMaster Universities

[[Page 24458]]

Arthritis Index (WOMAC) scores at 6 months. Variables run in these 
analyses included: age at surgery, BMI, gender, preoperative ROM, 
preoperative alignment, change in activity level (preoperative to 6 
months), and joint state (balanced versus unbalanced). For KSS and 
WOMAC, both step-wise and backward multivariate logistic regression 
analyses were calculated to be best fit models with similar 
significance (P = 0.001). Ultimately, the step-wise model was used. The 
applicant stated that the binary model revealed that the variable 
exhibiting the most significant effect of improvement on KSS and WOMAC 
scores was balanced joint state (P = 0.001; P = 0.004). The applicant 
noted that joint state was the most highly significant variable; this 
demonstrated similar levels of significance throughout all possible 
combinations of variables included in the model (P = 0.001). The 
applicant added that joint state was also observed to be the sole 
significant factor in patient-reported outcome score improvement (P b 
0.001).
    The applicant added that analysis of the data revealed there was 
also a concurrent significance observed with activity level (P = 
0.005). However, the applicant noted that activity level was not 
significant on its own. The applicant concluded that a balanced joint 
state results in a higher activity level,\53\ which would make activity 
level more of a dependent variable, rather than a predictor. Therefore, 
to demonstrate activity level, the applicant used a regression analysis 
and evaluated KSS and WOMAC scores at 6 months, with odds ratios. 
According to the applicant, odds ratios were calculated based on 
meaningful clinical improvement in KSS scores, WOMAC scores, and 
activity levels at 6 months. Additionally, based on literature review, 
``meaningful improvement'' for KSS scores were anything greater than 50 
points; WOMAC scores greater than 30 points; and gains in activity 
level greater than or equal two 2 lifestyle levels (from lowest score 
to highest: sedentary, semisedentary, light labor, moderate labor, 
heavy labor). Also, scores from the unbalanced group were used as the 
reference point. The applicant stated that odds ratio for balanced 
joint state and improved KSS score was 2.5, with a positive coefficient 
(95 percent CI). The applicant believed that this suggested a high 
probability of obtaining a meaningful improvement in KSS with a 
balanced knee joint, over those who do not have a balanced knee. 
According to the applicant, the odds ratio for balanced joint state and 
improved WOMAC score was 1.3, with a positive coefficient (95 percent 
CI). The applicant believed that this suggested a favorable probability 
that patients with a balanced joint state will achieve a meaningful 
improvement in WOMAC score, over those that do not have a balanced 
knee. According to the applicant, the odds ratio for balanced joint 
state and improved activity level was 1.8, with a positive coefficient 
(95 percent CI). The applicant believed that this also suggested a 
favorable probability of meaningful gains in activity level in those 
with a balanced knee, versus those with an unbalanced knee.
---------------------------------------------------------------------------

    \53\ Gustke, Golladay, et al.: A New Method for Defining 
Balance: Promising Short-Term Clinical Outcomes of Sensor-Guided 
TKA. The Journal of Arthroplasty 25 November 2013 (Article in Press 
DOI: 10.1016/j.arth.2013.10.020).
---------------------------------------------------------------------------

    The applicant further stated that 1 year clinical trial evidence 
supports the VKS technology protocol for TKA procedures. According to 
the applicant, of the 135 patients undergoing sensor-guided surgery, 13 
percent remained unbalanced (by surgeon discretion). The applicant 
stated that ``surgeon discretion,'' in this analysis, indicates that 
the surgeon recognized and accepted the ``unbalanced'' 
intercompartmental load difference as presented by the VKS technology, 
but felt that the knee was in a clinically acceptable state. Pre-
operatively, there was no statistical difference in any outcomes 
measures between the two cohorts, the averages of which were: total KSS 
= 105  24.6; total WOMAC = 47  14.8.
    Additionally, according to the applicant, at 1 year, the average 
total KSS score of balanced patients exceeded that of unbalanced 
patients by 23.3 points (P <0.001); 179  17.2 and 156 
 23.4 for the balanced and unbalanced cohort, respectively. 
The balanced cohort average score for KSS pain and function, 
separately, were 96.4 and 82.4 respectively; the unbalanced cohort 
scored 87.8 and 68.3 points for pain and function. The applicant stated 
that the disparities between the balanced and unbalanced patients' pain 
and function scores were also highly statistically significant (P 
<0.001, P=0.022).
    For WOMAC, the applicant noted that that the balanced cohort 
improved their score by 8 points; 10  11.8 and 18  17 for balanced and unbalanced patients, respectively (WOMAC is 
scored with an inverse scale; lower scores indicate more improvement). 
The applicant further stated that while this difference did not prove 
to be statistically significant by the standards set forth for this 
analysis (P = 0.085), the authors believed that this is due, in part, 
to the large standard deviations associated with both cohorts.
    According to the applicant, the balanced cohort's average activity 
level score was 48.6, which corresponds with the light to moderate 
labor categories (tennis, light jogging, heavy yard work) and the 
unbalanced patient's average activity level score was 26.7, which 
corresponds to the upper limits of the semi-sedentary range (light 
housework, walking for limited distances). The applicant believed that 
the difference between the average scores was statistically significant 
(P = 0.015). The applicant noted that the most notable aspect of every 
outcome measure collected is that the unbalanced patient scores at 1 
year still failed to achieve the level of improvement of the balanced 
patient scores at 6 months.
    We have a number of concerns regarding the applicant's assertions 
regarding substantial clinical improvement. First, we are concerned 
that during the trials, after using the device surgeons continued to 
make manual adjustments to the spacers to set the knee replacement. The 
applicant maintained that the VKS technology presents better accuracy 
for the surgeon when making adjustments to the spacers when implanting 
a knee replacement. However, we are concerned that the evidence does 
not delineate the degree of any improved outcomes or patient 
satisfaction associated with use of the VKS technology versus 
additional manual adjustments made by the surgeon. We also are 
concerned that most of the clinical evidence is based on patient 
satisfaction surveys. While the survey data appeared to demonstrate 
that patient satisfaction improved, we do not believe that the data 
presented is sufficient to determine if the VKS technology represents a 
substantial clinical improvement over manual adjustment. Furthermore, 
the use of historical literature controls might be useful during early 
clinical development, but there are possible biases and limitations of 
this research design. Specifically, there could be multiple differences 
in the pre-procedure clinical characteristics of patients with 
``unbalanced'' knees and those with ``balanced'' knees that could 
affect outcomes, such as more severe initial disease, more pre-
operative misalignment, more obesity, or more comorbidity. These and 
other potential confounders were not documented or adjusted for in the 
analyses of outcomes in the literature provided by the applicant. 
Additionally, as discussed above, the applicant released a first 
version of the VKS technology in 2011

[[Page 24459]]

and advancements were made to the VKS technology that resulted in 
additional FDA clearances in 2013. The applicant stated in its 
application that the first version is considered the first technology 
of its kind and, therefore, we believe that the VKS technology may no 
longer be considered new. The applicant submitted an application for 
the advanced version of the VKS technology from 2013. However, the 
applicant did not present clinical data to distinguish the improvements 
made to the advanced version from the first version. Therefore, we are 
unable to determine if the advanced version represents a substantial 
clinical improvement over existing technologies (that is, the first 
version of the VKS technology). We are inviting public comments on 
whether the VKS technology meets the substantial clinical improvement 
criterion, specifically with regard to our concerns.
i. WATCHMAN[supreg] Left Atrial Appendage (LAA) Closure Technology
    Boston Scientific Corporation submitted an application for new 
technology add-on payments for FY 2016 for the WATCHMAN[supreg] Left 
Atrial Appendage (LAA) Closure Technology (WATCHMAN[supreg] System). 
(We note that, as discussed in detail later in this section, the 
applicant submitted an application for new technology add-on payments 
for FY 2015 for the WATCHMAN[supreg] System, but withdrew its 
application after we issued the FY 2015 IPPS/LTCH PPS proposed rule.) 
According to the applicant, when a patient has been diagnosed with 
atrial fibrillation (AF), the left atrium does not expand and contract 
normally. As a result, the left atrium is not capable of completely 
emptying itself of blood. Blood may pool, particularly in the part of 
the left atrium called the left atrial appendage. This pooled blood is 
prone to clotting, causing formation of a thrombus. If a thrombus 
breaks off, it is called an embolism (or thromboembolism). An embolism 
can cause a stroke or other peripheral arterial blockage.
    The applicant asserted that the WATCHMAN[supreg] System device is 
an implant that acts as a physical barrier, sealing the LAA to prevent 
thromboemboli from entering into the arterial circulation from the LAA, 
thereby reducing the risk of stroke and potentially eliminating the 
need for Warfarin therapy for patients diagnosed with nonvalvular AF 
who are eligible for Warfarin therapy but for whom the risks of long-
term oral anticoagulation outweigh the benefits.
    With regard to newness criterion, the applicant anticipated FDA 
premarket approval of the WATCHMAN[supreg] System in the first half of 
2015. According to the applicant, the WATCHMAN[supreg] System is the 
first LAA closure device that would be approved by the FDA. Therefore, 
the applicant believed that the technology meets the newness criterion. 
Effective October 1, 2004 (FY 2005), ICD-9-CM procedure code 37.90 
(Insertion of left atrial appendage device) was created to identify and 
describe procedures using the WATCHMAN[supreg] Left Atrial Appendage 
(LAA) Closure Technology. As stated in section II.G.1.a. of the 
preamble of this proposed rule, effective October 1, 2015 (FY 2016), 
the ICD-10 coding system will be implemented. Under the ICD-10-PCS, 
procedure code 02L73DK (Occlusion of left atrial appendage with 
intraluminal device, percutaneous approach) is the comparable 
translation for ICD-9-CM procedure code 37.90.
    We are inviting public comments on if, and how, the 
WATCHMAN[supreg] System meets the newness criterion.
    With regard to the cost criterion, the applicant used the FY 2013 
MedPAR file (which contained inpatient hospital claims data for 
discharges from October 1, 2012 to September 30, 2013) to search for 
cases reporting ICD-9-CM procedure code 37.90. The applicant provided 
two analyses. The first analysis includes all claims that reported ICD-
9-CM procedure code 37.90, regardless of whether the code indicated a 
principal procedure that determined the MS-DRG assignment of the case. 
This analysis identified 507 cases across 29 MS-DRGs. The applicant 
noted that the MedPAR file contained claims that were returned to the 
provider that reported charges for actual cases from clinical trials 
that used the WATCHMAN[supreg] System that were well below post-FDA 
approval pricing. Therefore, the applicant removed the premarket device 
related charges. The applicant then standardized the charges, applied 
an inflation factor of 1.10443 based on the 2-year charge inflation 
factor listed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50379) and 
then added post-FDA approval charges for the WATCHMAN[supreg] System. 
Using the anticipated cost of the device after FDA approval and the 
National Average Implantable Device cost center CCR, the applicant 
estimated device charges post-FDA approval, combined those with the 
inflated average case-weighted standardized charges per case, and 
determined a final inflated average case-weighted standardized charge 
per case of $150,213. The average case-weighted threshold amount in the 
FY 2015 IPPS Table 10 for these MS-DRGs was $97,505. Because the final 
inflated average case-weighted standardized charge per case exceeds the 
average case-weighted threshold amount of $97,505, the applicant 
maintained that the WATCHMAN[supreg] System meets the cost criterion 
using this analysis. We are inviting public comments on the whether the 
WATCHMAN[supreg] System meets the cost criterion based on this 
analysis.
    In the applicant's second analysis, cases eligible for the 
WATCHMAN[supreg] System were identified by claims reporting ICD-9-CM 
procedure code 37.90 assigned to MS-DRGs 250 and 251 (Percutaneous 
Cardiovascular Procedures without Coronary Artery Stent with MCC and 
without MCC, respectively). The applicant believed that these are the 
MS-DRGs to which cases are typically assigned if the WATCHMAN[supreg] 
System is used in the principal procedure performed during the 
inpatient stay. The applicant applied the trims in the FY 2015 IPPS/
LTCH PPS final rule (79 FR49910 through 49911), which resulted in 369 
cases.
    As with its first analysis, the applicant determined standardized 
nondevice charges for the applicable cases using claims data from the 
FY 2013 MedPAR file and applied an inflation factor. The applicant 
calculated average nondevice charges by subtracting what the applicant 
believed was the average total implantable device charges (calculated 
as the sum of the five individual device charge fields in the MedPAR 
file that constitute the Implantable Device cost center). Similar to 
its first analysis, the applicant then standardized the charges, 
applied an inflation factor of 1.10443, subtracted the device charges 
reported on the MedPAR claims (reflecting costs during the IDE study) 
and replaced them with the anticipated charges following FDA approval 
(converting the costs of the device to charges with a CCR of 0.349 
based on the national average implantable device CCR from the FY 2015 
IPPS/LTCH PPS final rule (79 FR 49914)), combined those with the 
inflated average case-weighted standardized charges per case, and 
determined a final inflated average case-weighted standardized charge 
per case of $117,663. The average case-weighted threshold amount for 
these MS-DRGs in the FY 2015 IPPS Table 10 was $72,804. Because the 
final inflated average case-weighted standardized charge per case 
exceeds the average case-weighted MS-DRG threshold amount of $72,804, 
the applicant maintained that the WATCHMAN[supreg] System meets the 
cost

[[Page 24460]]

criterion using this analysis. We note that the applicant searched for 
cases reporting ICD-9-CM procedure code 37.90. In section II.G.3.b. of 
the preamble of this proposed rule, we present a proposal regarding 
cardiac ablation and other specified cardiovascular procedures. 
Specifically, we are proposing to assign the procedures performed 
within the heart chambers using intracardiac techniques, including 
those identified by ICD-9-CM procedure code 37.90, to two new proposed 
MS-DRGs: Proposed MS-DRG 273 (Percutaneous Intracardiac Procedures with 
MCC) and proposed MS-DRG 274 (Percutaneous Intracardiac Procedures 
without MCC). We believe that this could have implications for 
determining whether the applicant meets the cost criterion. There have 
been instances in the past where the coding associated with a new 
technology application is included in a proposal to change one or more 
MS-DRGs. For example, in the FY 2013 IPPS/LTCH PPS final rule, we 
describe the cost analysis for the Zenith[supreg] Fenestrated Abdominal 
Aortic Aneurysm Endovascular Graft which was identified by ICD-9-CM 
procedure code 39.78. In that same rule, we finalized a change to the 
assignment of that procedure code, reassigning it from MS-DRGs 252, 
253, and 254 to MS-DRGs 237 and 238. Because of that change, we 
determined that, for FY 2013, in order for the Zenith[supreg] 
Fenestrated Abdominal Aortic Aneurysm Endovascular Graft to meet the 
cost criteria, it must demonstrate that the average case-weighted 
standardized charge per case exceeds the thresholds for MS-DRGs 237 and 
238 (77 FR 55360). We note that in that example, MS-DRGs 237 and 238 
existed previously; therefore, thresholds that were 75 percent of one 
standard deviation beyond the geometric mean standardized charge for 
these DRGs were available to the public in Table 10 at the time the 
application was submitted. In this case, if MS-DRGs 273 and 274 were to 
be finalized for FY 2016, we recognize that thresholds that are 75 
percent of one standard deviation beyond the geometric mean 
standardized charge would not have been available at the time the 
application was submitted. However, we believe that it could be 
appropriate for the applicant to demonstrate that the average case-
weighted standardized charge per case exceeds these thresholds for MS-
DRGs 273 and 274. Accordingly, we intend to calculate supplemental 
threshold values using the data used to generate the FY 2015 IPPS/LTCH 
PPS Table 10 and reassign the procedure codes in accordance with the 
proposals outlined in section II.G.3.b. of the preamble of this 
proposed rule. We intend to make these supplemental threshold values 
available for public consideration on our Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/newtech.html. We are inviting public comments on 
whether considering these supplemental threshold values as part of the 
cost criterion evaluation for this application is appropriate and also 
on how to address similar future situations in a broader policy context 
should they occur. We also are inviting public comments on the whether 
the WATCHMAN[supreg] System meets the cost criterion based on the 
applicant's analysis.
    Regarding the substantial clinical improvement criterion, we note 
that the applicant applied for new technology add-on payments for FY 
2015 (as discussed in the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 
28043 through 28045)). However, prior to the publication of the FY 2015 
IPPS/LTCH PPS final rule, the applicant withdrew its application. 
Before the withdrawal of the application, CMS stated its concerns with 
the application in the FY 2015 IPPS/LTCH PPS proposed rule. The 
applicant included responses to CMS' previous concerns with the FY 2015 
application in its FY 2016 application. Therefore, we are addressing 
the applicant's responses to the previous concerns specified in the FY 
2015 IPPS/LTCH PPS proposed rule as well as our observations on the 
current FY 2016 application in this FY 2016 IPPS/LTCH PPS proposed 
rule.
    The applicant asserted that the WATCHMAN[supreg] System, a system 
that reduces the risk of thromboembolic stroke in patients diagnosed 
with high-risk nonvalvular AF who are eligible for Warfarin therapy, 
but in whom the potential risks of Warfarin therapy outweigh the 
potential benefits, meets the substantial clinical improvement 
criterion because the WATCHMAN[supreg] System is superior to currently 
available treatments. The applicant claimed that the WATCHMAN[supreg] 
System is ideal for patients diagnosed with a prior hemorrhagic stroke 
while on Warfarin therapy, patients not adherent to Warfarin therapy, 
patients with difficulty achieving a therapeutic international 
normalized ratio (INR), and patients with an increased risk or history 
of falls. The applicant acknowledged that anticoagulation using 
Warfarin therapy or one of the novel oral anticoagulation agents 
(NOACs), such as dabigatran, rivaroxaban, or apixaban, is effective for 
preventing thromboembolism in patients who can tolerate such medication 
over the long term. However, these medications are associated with 
certain risks. The applicant stated that the most used and studied 
agent, Warfarin, requires dietary restrictions, has a high-risk of drug 
interactions, genetic variability in dose-response, and the need for 
frequent monitoring. According to the applicant, the average patient 
diagnosed with AF and treated with Warfarin therapy achieves a 
therapeutic INR for approximately one-half of the treatment time. The 
applicant further stated that these NOACs also have nonadherence risks, 
high discontinuation rates (up to 20 percent within 2 years), are 
difficult to monitor effectiveness, and in some cases have no readily 
available reversal strategy.
    In support of its assertion that the WATCHMAN[supreg] System is a 
substantial improvement, the applicant submitted data from two pivotal 
studies (PROTECT AF and the WATCHMAN[supreg] Left Atrial Appendage 
Closure Device in Patients With Atrial Fibrillation Versus Long-Term 
Warfarin Therapy (PREVAIL)). The data included results of a meta-
analysis of the PROTECT AF and PREVAIL studies, an imputed placebo 
analysis, and a post hoc analysis of the bleeding risks associated with 
the WATCHMAN[supreg] System. According to the applicant, the clinical 
evidence from these trials and analyses establish the following: 
implantation of the WATCHMAN[supreg] System is safe; the 
WATCHMAN[supreg] System is superior to Warfarin when evaluated against 
a composite endpoint of all stroke, systemic embolism, and 
cardiovascular unexplained death in long-term follow-up; the 
WATCHMAN[supreg] System provides a greater reduction in major bleeding 
events after the conclusion of post procedure anti-thrombotic 
medication; and the WATCHMAN[supreg] System reduces the incidence of 
ischemic stroke when compared to patients diagnosed with AF who are not 
treated with Warfarin or other anticoagulation medication.
    We note that, unlike in the FY 2015 application, the applicant did 
not include data from the ASAP study. In the FY 2015 IPPS/LTCH PPS 
proposed rule (79 FR 28043 through 28045), we expressed concerns that 
data from the ASAP study suggested that the device did not prevent 
strokes and was insufficient to demonstrate efficacy in the secondary 
patient population (patients diagnosed with AF who were ineligible for 
oral anticoagulation). We specifically stated that the ASAP

[[Page 24461]]

Registry (5) enrolled 150 patients, at one of four centers, that had a 
contraindication to even short-term anticoagulation, mostly a history 
of prior bleeding, and there was no control group. Device implantation 
led to a serious adverse event in 13 patients (8.7 percent), including 
one case of device thrombus leading to ischemic stroke. Five other 
patients had a device-related thrombus that did not lead to stroke (4 
of these patients were treated with low molecular weight heparin), 
resulting in an overall 4.0 percent incidence (6 out of 150) of device-
associated thrombus. In the PROTECT AF trial study, 20 of the 473 
patients (4.2 percent) had device-associated thrombus, 3 of which led 
to an ischemic stroke. The rates of device-related thrombus are similar 
in the two studies (4.0 percent versus 4.2 percent), but the number of 
patients studied is smaller in the ASAP Registry (5) study compared to 
the PROTECT AF clinical trial study. In the 14-month follow-up data for 
the ASAP Registry (5) study, the rate of stroke or systemic embolism 
was 2.3 percent per year, which was said to be ``lower than expected'' 
based on prior data for patients diagnosed with AF who were not treated 
with warfarin (there was no concurrent control group). The data 
provided suggested efficacy in this patient population. However, we 
stated that we were concerned that there was not strong evidence that 
the device prevents stroke.
    In the FY 2016 application, the applicant responded that, because 
the current intended use and indications for the WATCHMAN[supreg] 
System in the United States do not include patients who are ineligible 
for treatment using Warfarin therapy, the data from the ASAP study are 
irrelevant to the FY 2016 application. The applicant provided data from 
an imputed placebo analysis, a post-hoc analysis that compared the 
observed rate of ischemic strokes in patients treated with the 
WATCHMAN[supreg] System compared to no therapy, in order to address our 
concern that there was not strong evidence that the device prevented 
stroke.
    According to the applicant, in the PROTECT AF trial, 463 patients 
were randomized to the WATCHMAN[supreg] System device and 244 patients 
to Warfarin therapy. Most patients randomized to the WATCHMAN[supreg] 
System device had it implanted (408 = 88 percent). Over the average 3.8 
years of follow-up, more patients in the Warfarin therapy group 
withdrew (45 versus 15) or were lost to follow-up (11 versus 13) than 
in the WATCHMAN[supreg] System device group, leading to shorter mean 
follow-up (3.7 versus 3.9 years) in the Warfarin therapy group.
    The applicant presented data shown in the following table and 
maintained that the results of the PROTECT study demonstrate primary 
efficacy and support that the WATCHMAN[supreg] System is noninferior 
and superior at 4 years.

                                             Table 3--PROTECT Primary Efficacy Supports WATCHMAN[supreg] Non-Inferiority and Superiority at 4 Years
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 WATCHMAN[supreg]       Warfarin          Percentage                             Posterior probability *
                                                 Years of mean   System  observed    observed rate      reduction vs.   ------------------------------------------------------------------------
                 Patient years                     follow-up      rate  per 100     per 100 patient        warfarin       Non-inferiority    Superiority (S)
                                                                  patient  years         years            (percent)       (NI)  (percent)       (percent)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
1065...........................................            1.5                3                  4.9                 38              >99.9              90.00  NI.
1588...........................................            2.3                3                  4.3                 29              >99.9              84.60  NI.
2621...........................................            3.8                2.3                3.8                 40              >99                96     NI and S.
2717...........................................            4                  2.2                3.7                 39              >99.9              95.40  NI and S.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* For Bayesian analysis, a posterior probability of 97.5 percent represents non-inferiority; >=95 percent represents superiority.

    In the FY 2015 IPPS/LTCH PPS proposed rule, we expressed concern 
that the evidence presented by the applicant demonstrating superiority 
compared to Warfarin therapy was insufficient. We expressed concern 
that the PROTECT AF trial was not designed to demonstrate superiority, 
and instead was designed to demonstrate noninferiority. We also 
expressed concern that the PREVAIL trial endpoint was not significantly 
improved in the conventional hypothesis testing statistical analysis at 
any time point. We stated that the longer term data showed improved 
efficacy and safety, but still remain sparse. In the FY 2016 
application, the applicant stated that, under a Bayesian analysis, the 
distributions of the posterior probabilities are not symmetrical. 
According to the applicant, posterior probabilities represent the 
appropriate way to determine statistical significance in Bayesian 
methodology. As predefined in the PROTECT AF trial, a posterior 
probability for noninferiority of equal to or more than 97.5 percent, 
and a prespecified level of at least 95 percent to support superiority 
were the criteria for statistical testing. According to the applicant, 
in both cases (noninferiority and superiority), the criteria were met 
for long-term follow-up as demonstrated in the results of the PROTECT 
AF trial. We agree that the Bayesian methodology is a valid method of 
analysis. However, we were referencing the overall efficacy 
noninferiority in the PREVAIL trial.
    We continue to be concerned that the data results from the PROTECT 
AF study are insufficient to show superiority of the WATCHMAN[supreg] 
System over Warfarin therapy. We note that the study was unblinded with 
a noninferiority design. We believe that the reduction in 
cardiovascular mortality shown in the results from the PROTECT AF study 
was unexpected and not well explained. Among the 57 patients in the 
WATCHMAN[supreg] System group who died, only 53 patient cases were 
assigned a cause of death and only 5 of the 9 ``unexplained/other 
deaths'' were included in the primary endpoint, although the protocol 
established that unexplained deaths were to be considered as 
cardiovascular mortalities. The total number of ``cardiovascular or 
unexplained deaths'' would have been 21, not 17. In the Warfarin 
therapy group, there was 1 ``unexplained/other'' death that should have 
been included in the primary endpoint, resulting in a total of 23, not 
22. We acknowledge that it may be difficult to calculate the impact of 
these additional events as the intention-to-treat analysis of the 
primary endpoint. However, we are concerned that the inclusion of the 
additional deaths could have made the posterior probabilities for the 
device less favorable. Based on the data at face value, it appears that 
the WATCHMAN[supreg] System does not demonstrate statistically 
significant superiority over treatment with Warfarin therapy until 3.8 
years has elapsed and the patient has been administered 6 months of 
oral anticoagulation and been exposed to the risk of the device-related 
complications. We are concerned that the applicant has

[[Page 24462]]

not demonstrated substantially improved clinical outcomes.
    In the prospective randomized evaluation of the PREVAIL study, the 
goal was to assess the safety and efficacy of LAA occlusion for stroke 
prevention in patients diagnosed with NVAF compared to long-term 
Warfarin therapy. The PREVAIL study was a confirmatory randomized trial 
designed to further assess the efficacy and safety of the 
WATCHMAN[supreg] System device. Patient selection and study design were 
similar to the PROTECT AF study. Two efficacy and 1 safety coprimary 
endpoints were assessed at 18 months. The rate of the first coprimary 
efficacy endpoint overall efficacy (composite of stroke, systemic 
embolism [SE], and cardiovascular/unexplained death) was 0.064 in the 
WATCHMAN[supreg] System device group versus 0.063 in the control group 
(rate ratio 1.07 [95 percent credible interval (CrI) 0.57 to 1.89]) and 
did not achieve the prespecified criteria of noninferiority (upper 
boundary of 95 percent CrI 1.75). The rate for the second coprimary 
efficacy endpoint (stroke or SE >7 days' postrandomization) was 0.0253 
versus 0.0200 (risk difference 0.0053 [95 percent CrI -0.0190 to 
0.0273]), which achieved noninferiority. Early safety events were 
significantly lower than the results of the PROTECT AF study, which 
satisfies the prespecified safety performance goal. The PREVAIL study 
was designed to demonstrate noninferiority with wide efficacy margins. 
However, as previously stated, we are concerned that the results of the 
study did not show the overall efficacy of the technology to be 
noninferior.
    The applicant submitted data from a patient-level meta-analysis 
that combined the data from the PROTECT AF study with the data from the 
PREVAIL study. According to the applicant, this analysis supports the 
efficacy of the WATCHMAN[supreg] System and shows that the device was 
performing as expected compared to the Warfarin therapy control arm. 
The datasets were combined and weighted. According to the applicant, 
multiple outcomes of interest were examined, starting with the primary 
efficacy endpoint and then looking at individual outcomes: All stroke 
(ischemic and hemorrhagic) and associated disability; systemic 
embolism; cardiovascular/unexplained death; and major bleeding. The 
overall incidence of all strokes (ischemic and hemorrhagic) was not 
statistically different in the WATCHMAN[supreg] System arm and the 
Warfarin therapy arm. However, the applicant stated that there were 
statistical differences identified when it analyzed the stroke 
subtypes. The applicant indicated that, initially, there were more 
ischemic strokes in the WATCHMAN[supreg] System arm. However, after 
accounting for early procedural complications, including strokes 
(within 7 days post procedure) in the PROTECT AF study, the difference 
for ischemic stroke between the two arms fell below statistical 
significance (p = 0.21). According to the applicant, there were 
significantly more hemorrhagic strokes and cardiovascular deaths in the 
Warfarin therapy arm compared to the WATCHMAN[supreg] System arm, 
showing a 78 percent and 52 percent reduction in those events 
respectively (p = 0.004 and p = 0.006). To better assess the clinical 
impact of the different subtypes of strokes on patients, the applicant 
also performed statistical tests on disabilities resulting from stroke. 
The applicant indicated that, using a validated stroke severity 
assessment tool (Modified Rankin score), analyses show that there were 
significantly less disabling strokes with the WATCHMAN[supreg] System 
than Warfarin therapy. The applicant believed that this represents a 
substantial clinical improvement for the WATCHMAN[supreg] System 
device.
    The applicant conducted an imputed placebo analysis to assess the 
benefit that untreated patients may expect with the WATCHMAN[supreg] 
System device. The applicant contended that many patients who are 
eligible for Warfarin therapy are not receiving any treatment and, 
therefore, are left unprotected from stroke. With annual ischemic 
stroke rates ranging from 5.6 percent to 7.1 percent, the applicant 
maintained that the WATCHMAN[supreg] System device provides a 
substantive clinical benefit. In order to assess the benefit that 
untreated patients may be able to expect with the WATCHMAN[supreg] 
System, the sponsor performed the following exploratory analysis. The 
observed device ischemic strokes rates were compared against the 
estimated stroke risk of untreated nonvalvular AF patients. A placebo 
arm was then constructed using ``well-established, validated 
literature'' models based on both the CHADS2 and CHA2DS2-VASc scores. 
The applicant reported that this analysis showed the WATCHMAN[supreg] 
System device reduced stroke in the untreated patient population by 61 
to 81 percent.
    We previously expressed concern that there was a lack of strong 
evidence demonstrating that the WATCHMAN[supreg] System prevents stroke 
at all. The applicant responded that the imputed placebo analysis cited 
above addresses this concern. The applicant provided the table below as 
part of its FY 2016 application to show the relative risk reduction in 
Ischemic stroke rates using the WATCHMAN[supreg] System versus no 
therapy.

        Table 5--WATCHMAN[supreg] Shows Significant Reduction in Ischemic Strokes Compared to No Therapy
----------------------------------------------------------------------------------------------------------------
                                       Average CHADS (2       Observed
                                         footnote on      WATCHMAN[supreg]
                Study                   acronym) score    annual ischemic   Imputed untreated    Relative risk
                                       WATCHMAN[supreg]   stroke rate (95   annual event rate      reduction
                                           patients         percent CI)
----------------------------------------------------------------------------------------------------------------
PROTECT AF..........................                2.2     1.3 (0.9, 2.0)            5.6-5.7     77% (64%, 84%)
PREVAIL-only........................                2.6     2.3 (1.3, 4.0)            6.6-6.7     65% (39%, 80%)
CAP.................................                2.5     1.2 (0.8, 1.8)                6.4     81% (72%, 88%)
----------------------------------------------------------------------------------------------------------------

    While the results of this analysis appear to suggest a large 
reduction in ischemic stroke rates in patients who did not receive any 
treatment, we continue to have some concerns regarding whether the 
WATCHMAN[supreg] System device prevents strokes. The indication for the 
treatment of the WATCHMAN[supreg] System device is for patients who are 
eligible for Warfarin therapy as opposed to patients who are ineligible 
for Warfarin therapy. We are concerned that the results of the imputed 
placebo analysis are not sufficient to determine whether the 
WATCHMAN[supreg] System reduces the risk of stroke in patients who are 
eligible for Warfarin therapy. The applicant suggested that patients 
who are subtherapeutic or noncompliant with Warfarin therapy would have 
the same risk of stroke as patients who do not receive any therapy. 
However, the applicant but did not offer any evidence

[[Page 24463]]

that these two groups have the same risk of stroke. The 
WATCHMAN[supreg] System device is intended only for use in patients who 
are eligible for the anticoagulation, not for patients who have 
contraindications to oral anticoagulation. Because the device will not 
be labeled for use in those patients, we believe that an analysis 
comparing stroke risk of untreated patients to those patients treated 
with the WATCHMAN[supreg] System is of limited value in assessing the 
technology's benefit over existing therapy.
    The applicant asserted that one of the primary goals of mechanical 
LAA closure is to provide an alternative treatment for patients other 
than long-term Warfarin therapy and exposure to the associated risk for 
bleeding. Although the primary efficacy endpoint of the PROTECT AF and 
PREVAIL studies considered hemorrhagic stroke, it did not encompass 
other types of major bleeding that may be associated with the use of 
Warfarin. The applicant indicated that it performed a supplemental 
analysis to determine the relative risks of all types of bleeding. The 
applicant divided the follow-up interval into four subsections (7 days, 
45 days, 6 months, and 54 months). The applicant compared bleeding 
events in the WATCHMAN[supreg] System group with the Warfarin therapy 
group and concluded that, after 6 months (and discontinued use of 
Clopidogrel in the WATCHMAN[supreg] System group), the continued use of 
Warfarin was associated with a 3.4 fold increase in the risk of major 
bleeding. According to the applicant, the significant reduction in 
bleeding after the procedural and concomitant medication therapy (6 
months) with the cessation of long-term anticoagulants illustrates the 
substantial clinical benefit of the WATCHMAN[supreg] System. However, 
given the high burden endured (most notably, the higher risk of 
bleeding occurring in the first 7 days of an inpatient hospital stay) 
to achieve a reduction in bleeding in the long term, we do not believe 
that the WATCHMAN[supreg] System meets the criteria for substantially 
improved clinical outcomes. We are inviting public comments on whether 
this technology meets the substantial clinical improvement criterion, 
particularly in light of the applicant's response to our previous 
concerns and our current concern that there remains insufficient 
evidence that the WATCHMAN[supreg] System substantially improves 
clinical outcomes in patients diagnosed with nonvalvular AF and who are 
eligible for Warfarin therapy.
    We did not receive any public comments in response to the New 
Technology Town Hall meeting held on February 13, 2015 in regard to the 
WATCHMAN[supreg] System technology.

III. Proposed Changes to the Hospital Wage Index for Acute Care 
Hospitals

A. Background

1. Legislative Authority
    Section 1886(d)(3)(E) of the Act requires that, as part of the 
methodology for determining prospective payments to hospitals, the 
Secretary adjust the standardized amounts for area differences in 
hospital wage levels by a factor (established by the Secretary) 
reflecting the relative hospital wage level in the geographic area of 
the hospital compared to the national average hospital wage level. We 
currently define hospital labor market areas based on the delineations 
of statistical areas established by the Office of Management and Budget 
(OMB). A discussion of the proposed FY 2016 hospital wage index based 
on the statistical areas appears under sections III.A.2. and G. of the 
preamble of this proposed rule.
    Section 1886(d)(3)(E) of the Act requires the Secretary to update 
the wage index annually and to base the update on a survey of wages and 
wage-related costs of short-term, acute care hospitals. This provision 
also requires that any updates or adjustments to the wage index be made 
in a manner that ensures that aggregate payments to hospitals are not 
affected by the change in the wage index. The proposed adjustment for 
FY 2016 is discussed in section II.B. of the Addendum to this proposed 
rule.
    As discussed in section III.J. of the preamble of this proposed 
rule, we also take into account the geographic reclassification of 
hospitals in accordance with sections 1886(d)(8)(B) and 1886(d)(10) of 
the Act when calculating IPPS payment amounts. Under section 
1886(d)(8)(D) of the Act, the Secretary is required to adjust the 
standardized amounts so as to ensure that aggregate payments under the 
IPPS after implementation of the provisions of sections 1886(d)(8)(B), 
1886(d)(8)(C), and 1886(d)(10) of the Act are equal to the aggregate 
prospective payments that would have been made absent these provisions. 
The proposed budget neutrality adjustment for FY 2016 is discussed in 
section II.A.4.b. of the Addendum to this proposed rule.
    Section 1886(d)(3)(E) of the Act also provides for the collection 
of data every 3 years on the occupational mix of employees for short-
term, acute care hospitals participating in the Medicare program, in 
order to construct an occupational mix adjustment to the wage index. A 
discussion of the occupational mix adjustment that we are proposing to 
apply, beginning October 1, 2015 (to the FY 2016 wage index), appears 
under sections III.E.3. and F. of the preamble of this proposed rule.
2. Core-Based Statistical Areas (CBSAs) for the Proposed Rule
    The wage index is calculated and assigned to hospitals on the basis 
of the labor market area in which the hospital is located. Under 
section 1886(d)(3)(E) of the Act, beginning with FY 2005, we delineate 
hospital labor market areas based on OMB-established Core-Based 
Statistical Areas (CBSAs). The current statistical areas (which were 
implemented beginning with FY 2015) are based on revised OMB 
delineations issued on February 28, 2013, in OMB Bulletin No. 13-01. 
OMB Bulletin No. 13-01 established revised delineations for 
Metropolitan Statistical Areas, Micropolitan Statistical Areas, and 
Combined Statistical Areas in the United States and Puerto Rico, and 
provided guidance on the use of the delineations of these statistical 
areas based on new standards published on June 28, 2010 in the Federal 
Register (75 FR 37246 through 37252) and the 2010 Census of Population 
and Housing data (we refer to these revised OMB delineations as the 
``new OMB delineations'' in this proposed rule). A copy of this 
bulletin may be obtained at http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b-13-01.pdf. We refer readers to the FY 2015 
IPPS/LTCH PPS final rule (79 FR 49951 through 49963) for a full 
discussion of our implementation of the new OMB labor market area 
delineations for the FY 2015 wage index. For FY 2016, we are continuing 
to use the new OMB delineations that we adopted beginning with FY 2015 
to calculate the area wage indexes and the transition periods, which we 
discuss below.

B. Worksheet S-3 Wage Data for the Proposed FY 2016 Wage Index

    The proposed FY 2016 wage index values are based on the data 
collected from the Medicare cost reports submitted by hospitals for 
cost reporting periods beginning in FY 2012 (the FY 2015 wage indexes 
were based on data from cost reporting periods beginning during FY 
2011).
1. Included Categories of Costs
    The proposed FY 2016 wage index includes the following categories 
of data associated with costs paid under the IPPS (as well as 
outpatient costs):

[[Page 24464]]

     Salaries and hours from short-term, acute care hospitals 
(including paid lunch hours and hours associated with military leave 
and jury duty);
     Home office costs and hours;
     Certain contract labor costs and hours (which includes 
direct patient care, certain top management, pharmacy, laboratory, and 
nonteaching physician Part A services, and certain contract indirect 
patient care services (as discussed in the FY 2008 final rule with 
comment period (72 FR 47315 through 47318)); and
     Wage-related costs, including pension costs (based on 
policies adopted in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586 
through 51590)) and other deferred compensation costs.
2. Excluded Categories of Costs
    Consistent with the wage index methodology for FY 2015, the 
proposed wage index for FY 2016 also excludes the direct and overhead 
salaries and hours for services not subject to IPPS payment, such as 
skilled nursing facility (SNF) services, home health services, costs 
related to GME (teaching physicians and residents) and certified 
registered nurse anesthetists (CRNAs), and other subprovider components 
that are not paid under the IPPS. The proposed FY 2016 wage index also 
excludes the salaries, hours, and wage-related costs of hospital-based 
rural health clinics (RHCs), and Federally qualified health centers 
(FQHCs) because Medicare pays for these costs outside of the IPPS (68 
FR 45395). In addition, salaries, hours, and wage-related costs of CAHs 
are excluded from the proposed wage index for the reasons explained in 
the FY 2004 IPPS final rule (68 FR 45397 through 45398).
3. Use of Wage Index Data by Suppliers and Providers Other Than Acute 
Care Hospitals Under the IPPS
    Data collected for the IPPS wage index also are currently used to 
calculate wage indexes applicable to suppliers and other providers, 
such as SNFs, home health agencies (HHAs), ambulatory surgical centers 
(ASCs), and hospices. In addition, they are used for prospective 
payments to IRFs, IPFs, and LTCHs, and for hospital outpatient 
services. We note that, in the IPPS rules, we do not address comments 
pertaining to the wage indexes of any supplier or provider except IPPS 
providers and LTCHs. Such comments should be made in response to 
separate proposed rules for those suppliers and providers.

C. Verification of Worksheet S-3 Wage Data

    The wage data for the proposed FY 2016 wage index were obtained 
from Worksheet S-3, Parts II and III of the Medicare cost report for 
cost reporting periods beginning on or after October 1, 2011, and 
before October 1, 2012. For wage index purposes, we refer to cost 
reports during this period as the ``FY 2012 cost report,'' the ``FY 
2012 wage data,'' or the ``FY 2012 data.'' Instructions for completing 
the wage index sections of Worksheet S-3 are included in the Provider 
Reimbursement Manual (PRM), Part 2 (Pub. No. 15-2), Chapter 40, 
Sections 4005.2 through 4005.4 for Form CMS-2552-10. The data file used 
to construct the proposed FY 2016 wage index includes FY 2012 data 
submitted to us as of February 25, 2015. As in past years, we performed 
an extensive review of the wage data, mostly through the use of edits 
designed to identify aberrant data.
    We asked our MACs to revise or verify data elements that result in 
specific edit failures. For the proposed FY 2016 wage index, we 
identified and excluded 93 providers with aberrant data that should not 
be included in the proposed wage index. If data elements for some of 
these providers with aberrant data are corrected, we intend to include 
data from those providers in the final FY 2016 wage index. We also 
adjusted certain aberrant data elements within a provider's data and 
included these data in the proposed wage index. For example, in 
situations where a hospital did not have documentable salaries, wages, 
and hours for contract housekeeping and dietary services, we imputed 
estimates, in accordance with established policies as discussed in the 
FY 2015 IPPS/LTCH PPS final rule (79 FR 49965 through 49967). We 
instructed MACs to complete their data verification of questionable 
data elements and to transmit any changes to the wage data no later 
than February 25, 2015. We intend to resolve all unresolved data 
elements by the date the FY 2016 IPPS/LTCH PPS final rule is issued. 
The revised data will be reflected in the FY 2016 IPPS/LTCH PPS final 
rule.
    In constructing the proposed FY 2016 wage index, we included the 
wage data for facilities that were IPPS hospitals in FY 2012, inclusive 
of those facilities that have since terminated their participation in 
the program as hospitals, as long as those data did not fail any of our 
edits for reasonableness. We believe that including the wage data for 
these hospitals is, in general, appropriate to reflect the economic 
conditions in the various labor market areas during the relevant past 
period and to ensure that the current wage index represents the labor 
market area's current wages as compared to the national average of 
wages. However, we excluded the wage data for CAHs as discussed in the 
FY 2004 IPPS final rule (68 FR 45397 through 45398). For this FY 2016 
IPPS/LTCH PPS proposed rule, we removed 12 hospitals that converted to 
CAH status on or after February 13, 2014, the cut-off date for CAH 
exclusion from the FY 2015 wage index, and through and including 
February 5, 2015, the cut-off date for CAH exclusion from the FY 2016 
wage index. After removing hospitals with aberrant data and hospitals 
that converted to CAH status, we calculated the proposed FY 2016 wage 
index based on 3,335 hospitals.
    For the proposed FY 2016 wage index, we allotted the wages and 
hours data for a multicampus hospital among the different labor market 
areas where its campuses are located in the same manner that we 
allotted such hospitals' data in the FY 2015 wage index (79 FR 49964). 
Table 2, which contains the proposed FY 2016 wage index associated with 
this proposed rule (available via the Internet on the CMS Web site), 
includes separate wage data for the campuses of 7 multicampus 
hospitals.

D. Method for Computing the Proposed FY 2016 Unadjusted Wage Index

    The method used to compute the proposed FY 2016 wage index without 
an occupational mix adjustment follows the same methodology that we 
used to compute the FY 2012, FY 2013, FY 2014, and FY 2015 final wage 
indexes without an occupational mix adjustment (76 FR 51591 through 
51593, 77 FR 53366 through 53367, 78 FR 50587 through 50588, and 79 FR 
49967, respectively).
    As discussed in the FY 2012 IPPS/LTCH PPS final rule, in ``Step 
5,'' for each hospital, we adjust the total salaries plus wage-related 
costs to a common period to determine total adjusted salaries plus 
wage-related costs. To make the wage adjustment, we estimate the 
percentage change in the employment cost index (ECI) for compensation 
for each 30-day increment from October 14, 2011, through April 15, 
2013, for private industry hospital workers from the BLS' Compensation 
and Working Conditions. We have consistently used the ECI as the data 
source for our wages and salaries and other price proxies in the IPPS 
market basket, and we are not proposing any changes to the usage for

[[Page 24465]]

FY 2016. The factors used to adjust the hospital's data were based on 
the midpoint of the cost reporting period, as indicated in the 
following table.

                    Midpoint of Cost Reporting Period
------------------------------------------------------------------------
         After                    Before             Adjustment factor
------------------------------------------------------------------------
       10/14/2011               11/15/2011                 1.02167
       11/14/2011               12/15/2011                 1.02029
       12/14/2011               01/15/2012                 1.01893
       01/14/2012               02/15/2012                 1.01756
       02/14/2012               03/15/2012                 1.01620
       03/14/2012               04/15/2012                 1.01484
       04/14/2012               05/15/2012                 1.01348
       05/14/2012               06/15/2012                 1.01213
       06/14/2012               07/15/2012                 1.01080
       07/14/2012               08/15/2012                 1.00951
       08/14/2012               09/15/2012                 1.00825
       09/14/2012               10/15/2012                 1.00699
       10/14/2012               11/15/2012                 1.00568
       11/14/2012               12/15/2012                 1.00433
       12/14/2012               01/15/2013                 1.00292
       01/14/2013               02/15/2013                 1.00148
       02/14/2013               03/15/2013                 1.00000
       03/14/2013               04/15/2013                 0.98259
------------------------------------------------------------------------

    For example, the midpoint of a cost reporting period beginning 
January 1, 2012, and ending December 31, 2012, is June 30, 2012. An 
adjustment factor of 1.01080 would be applied to the wages of a 
hospital with such a cost reporting period.
    Using the data as described above, the proposed FY 2016 national 
average hourly wage (unadjusted for occupational mix) is $40.1203. The 
proposed FY 2016 Puerto Rico overall average hourly wage (unadjusted 
for occupational mix) is $16.718.

E. Proposed Occupational Mix Adjustment to the FY 2016 Wage Index

    As stated earlier, section 1886(d)(3)(E) of the Act provides for 
the collection of data every 3 years on the occupational mix of 
employees for each short-term, acute care hospital participating in the 
Medicare program, in order to construct an occupational mix adjustment 
to the wage index, for application beginning October 1, 2004 (the FY 
2005 wage index). The purpose of the occupational mix adjustment is to 
control for the effect of hospitals' employment choices on the wage 
index. For example, hospitals may choose to employ different 
combinations of registered nurses, licensed practical nurses, nursing 
aides, and medical assistants for the purpose of providing nursing care 
to their patients. The varying labor costs associated with these 
choices reflect hospital management decisions rather than geographic 
differences in the costs of labor.
1. Development of Data for the Proposed FY 2016 Occupational Mix 
Adjustment Based on the 2013 Medicare Wage Index Occupational Mix 
Survey
    As provided for under section 1886(d)(3)(E) of the Act, we collect 
data every 3 years on the occupational mix of employees for each short-
term, acute care hospital participating in the Medicare program.
    As discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49967 
through 49968), the occupational mix adjustment to the FY 2015 wage 
index was based on data collected on the 2010 Occupational Mix Survey 
Hospital Reporting Form (CMS-10079 (2010)). For the proposed FY 2016 
wage index, we are proposing to use the occupational mix data collected 
on the new 2013 survey to compute the occupational mix adjustment for 
FY 2016, as discussed in section II.B.2. of the preamble of this 
proposed rule.
2. New 2013 Occupational Mix Survey for the Proposed FY 2016 Wage Index
    Section 304(c) of Public Law 106-554 amended section 1886(d)(3)(E) 
of the Act to require CMS to collect data every 3 years on the 
occupational mix of employees for each short-term, acute care hospital 
participating in the Medicare program. We collected data in 2010 to 
compute the occupational mix adjustment for the FY 2013, FY 2014, and 
FY 2015 wage index. Therefore, we were required to collect data in 2013 
and are using these data to compute the occupational mix adjustment for 
the FY 2016 wage index.
    On December 7, 2012, we published in the Federal Register a notice 
soliciting comments on the proposed 2013 Medicare Wage Index 
Occupational Mix Survey (77 FR 73032 through 73033). The new 2013 
survey, which is being applied to the proposed FY 2016 wage index, 
includes the same data elements and definitions as the 2010 survey and 
provides for the collection of hospital-specific wages and hours data 
for nursing employees for calendar year 2013 (that is, payroll periods 
ending between January 1, 2013 and December 31, 2013). The comment 
period for the notice ended on February 5, 2013. After considering the 
public comments that we received on the December 2012 notice, we made a 
few minor editorial changes and published the 2013 survey in the 
Federal Register on February 28, 2013 (78 FR 13679 through 13680). This 
survey was approved by OMB on May 14, 2013, and is available on the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/WAGE-INDEX-OCCUPATIONAL-MIX-SURVEY2013.pdf.
    The 2013 Occupational Mix Survey Hospital Reporting Form CMS-10079 
for the Wage Index Beginning FY 2016 (in Excel format) is available on 
the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/Medicare-Wage-Index-Occupational-Mix-Survey2013.html?DLPage=1&DLSort=1&DLSortDir=descending. Hospitals were 
required to submit their completed 2013 surveys to their MACs by July 
1, 2014. The preliminary, unaudited 2013 survey data were posted on the 
CMS Web site afterward, on July 11, 2014.
    As with the Worksheet S-3 cost report wage data, we asked our MACs 
to revise or verify data elements in hospitals' occupational mix 
surveys that resulted in certain edit failures. Certain surveys with 
aberrant data elements are excluded from the proposed FY 2016 wage 
index, but any data elements resolved and revised in time to be 
included in the final wage index will be reflected in the FY 2016 IPPS/
LTCH PPS final rule.
3. Calculation of the Proposed Occupational Mix Adjustment for FY 2016
    For FY 2016, we are proposing to calculate the occupational mix 
adjustment factor using the same methodology that we used for the FY 
2012, FY 2013, FY 2014, and FY 2015 wage indexes (76 FR 51582 through 
51586, 77 FR 53367 through 53368, 78 FR 50588 through 50589, and 79 FR 
49968, respectively). As a result of applying this methodology, the 
proposed FY 2016 occupational mix adjusted national average hourly wage 
is $40.0853. The proposed FY 2016 occupational mix adjusted Puerto 
Rico-specific average hourly wage is $16.6329.
    Because the occupational mix adjustment is required by statute, all 
hospitals that are subject to payments under the IPPS, or any hospital 
that would be subject to the IPPS if not granted a waiver, must 
complete the occupational mix survey, unless the hospital has no 
associated cost report wage data that are included in the FY 2016 wage 
index. For the proposed FY 2016 wage index, because we are using the 
Worksheet S-3, Parts II and III wage data of 3,335 hospitals, and we 
are using the occupational mix surveys of 3,039 hospitals for which we 
also have Worksheet S-3 wage data, that represents a ``response'' rate 
of 91.1

[[Page 24466]]

percent (3,039/3,335). In the proposed FY 2016 wage index in this 
proposed rule, we applied proxy data for noncompliant hospitals, new 
hospitals, or hospitals that submitted erroneous or aberrant data in 
the same manner that we applied proxy data for such hospitals in the FY 
2012 wage index occupational mix adjustment (76 FR 51586).
    In the FY 2011 IPPS/LTCH PPS proposed rule and final rule (75 FR 
23943 and 75 FR 50167, respectively), we stated that, in order to gain 
a better understanding of why some hospitals are not submitting the 
occupational mix data, we will require hospitals that do not submit 
occupational mix data to provide an explanation for not complying. This 
requirement was effective for the 2013 occupational mix survey as well 
as the 2010 occupational mix survey. We instructed MACs to continue 
gathering this information as part of the FY 2016 wage index desk 
review process. We stated that we would review these data for future 
analysis and consideration of potential penalties for noncompliant 
hospitals.

F. Analysis and Implementation of the Proposed Occupational Mix 
Adjustment and the Proposed FY 2016 Occupational Mix Adjusted Wage 
Index

    As discussed in section III.E. of the preamble of this proposed 
rule, for FY 2016, we apply the occupational mix adjustment to 100 
percent of the proposed FY 2016 wage index. We calculated the proposed 
occupational mix adjustment using data from the 2013 occupational mix 
survey data, using the methodology described in the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51582 through 51586).
    Using the occupational mix survey data and applying the 
occupational mix adjustment to 100 percent of the proposed FY 2016 wage 
index results in a proposed national average hourly wage of $40.0853 
and a proposed Puerto-Rico specific average hourly wage of $16.6329. 
After excluding data of hospitals that either submitted aberrant data 
that failed critical edits or that did not have FY 2012 Worksheet S-3, 
Parts II and III, cost report data for use in calculating the proposed 
FY 2016 wage index, we calculated the proposed FY 2016 wage index using 
the occupational mix survey data from 3,039 hospitals. For the proposed 
FY 2016 wage index, because we are using the Worksheet S-3, Parts II 
and III wage data of 3,335 hospitals, and we are using the occupational 
mix survey data of 3,039 hospitals for which we also have Worksheet S-3 
wage data, those data represent a ``response'' rate of 91.1 percent 
(3,039/3,335). The proposed FY 2016 national average hourly wages for 
each occupational mix nursing subcategory as calculated in Step 2 of 
the occupational mix calculation are as follows:

------------------------------------------------------------------------
                                                              Proposed
           Occupational mix nursing subcategory                average
                                                             hourly wage
------------------------------------------------------------------------
National RN...............................................  38.70789914
National LPN and Surgical Technician......................  22.793680926
National Nurse Aide, Orderly, and Attendant...............  15.944111418
National Medical Assistant................................  18.009577806
National Nurse Category...................................  32.783151666
------------------------------------------------------------------------

    The proposed national average hourly wage for the entire nurse 
category as computed in Step 5 of the occupational mix calculation is 
$32.783151666. Hospitals with a nurse category average hourly wage (as 
calculated in Step 4 of the occupational mix calculation) of greater 
than the national nurse category average hourly wage receive an 
occupational mix adjustment factor (as calculated in Step 6 of the 
occupational mix calculation) of less than 1.0. Hospitals with a nurse 
category average hourly wage (as calculated in Step 4 of the 
occupational mix calculation) of less than the national nurse category 
average hourly wage receive an occupational mix adjustment factor (as 
calculated in Step 6 of the occupational mix calculation) of greater 
than 1.0.
    Based on the 2013 occupational mix survey data, we determined (in 
Step 7 of the occupational mix calculation) that the national 
percentage of hospital employees in the nurse category is 42.54 
percent, and the national percentage of hospital employees in the all 
other occupations category is 57.46 percent. At the CBSA level, the 
percentage of hospital employees in the nurse category ranged from a 
low of 26.72 percent in one CBSA to a high of 80.55 percent in another 
CBSA.
    The proposed FY 2016 Puerto Rico-specific average hourly wages for 
each occupational mix nursing subcategory as calculated in Step 2 of 
the occupational mix calculation are as follows:

------------------------------------------------------------------------
                                                              Proposed
                                                             Puerto Rico
           Occupational mix nursing subcategory                average
                                                             hourly wage
------------------------------------------------------------------------
Puerto Rico RN............................................  16.762672135
Puerto Rico LPN and Surgical Technician...................  10.053073049
Puerto Rico Nurse Aide, Orderly, and Attendant............   9.695410146
Puerto Rico Medical Assistant.............................  21.962356196
Puerto Rico Nurse Category................................  14.563182257
------------------------------------------------------------------------

    Based on the 2013 occupational mix survey data, we determined (in 
Step 7 of the occupational mix calculation) that the Puerto Rico 
percentage of hospital employees in the nurse category is 49.93 
percent, and the Puerto Rico percentage of hospital employees in the 
all other occupations category is 50.07 percent.
    We also compared the proposed FY 2016 wage data adjusted for 
occupational mix from the 2013 survey to the proposed FY 2016 wage data 
adjusted for occupational mix from the 2010 survey. This analysis 
illustrates the effect on area wage indexes of using the 2013 survey 
data compared to the 2010 survey data; that is, it shows whether 
hospitals' wage indexes would increase or decrease under the 2013 
survey data as compared to the prior 2010 survey data. Of the 407 urban 
CBSAs and 47 rural CBSAs, our analysis shows that the proposed FY 2016 
wage index values for 183 (45.0 percent) urban areas and 20 (42.6 
percent) rural areas would increase. Fifty-three (13.0 percent) urban 
areas would increase by greater than or equal to 1 percent but less 
than 5 percent, and 5 (1.2 percent) urban areas would increase by 5 
percent or more. Four (8.5 percent) rural areas would increase by 
greater than or equal to 1 percent but less than 5 percent, and no 
rural areas would increase by 5 percent or more. However, the proposed 
wage index values for 220 (54.1 percent) urban areas and 27 (57.4 
percent) rural areas would decrease using the 2013 survey data. 
Seventy-two (17.7 percent) urban areas would decrease by greater than 
or equal to 1 percent but less than 5 percent, and one (0.2 percent) 
urban area would decrease by 5 percent or more. Seven (14.9 percent) 
rural areas would decrease by greater than or equal to 1 percent but 
less than 5 percent, and no rural areas would decrease by 5 percent or 
more. The largest positive impacts using the 2013 survey data compared 
to the 2010 survey data are 15.0 percent for an urban area and 3.8 
percent for a rural area. The largest negative impacts are 5.0 percent 
for an urban area and 1.9 percent for two rural areas. Four urban areas 
and no rural areas would be unaffected. These results indicate that the 
proposed wage indexes of more CBSAs overall (54.4 percent) would 
decrease due to application of the 2013 occupational mix survey data as 
compared to the 2010 occupational mix survey data to the wage index.

[[Page 24467]]

Further, a larger percentage of urban areas (45.0 percent) would 
benefit from the use of the 2013 occupational mix survey data as 
compared to the 2010 occupational mix survey data than would rural 
areas (42.6 percent).
    We compared the proposed FY 2016 occupational mix adjusted wage 
indexes for each CBSA to the proposed unadjusted wage indexes for each 
CBSA. As a result of applying the occupational mix adjustment to the 
wage data, the proposed wage index values for 222 (54.5 percent) urban 
areas and 24 (51.1 percent) rural areas would increase. One hundred one 
(24.8 percent) urban areas would increase by greater than or equal to 1 
percent but less than 5 percent, and 6 (1.5 percent) urban areas would 
increase by 5 percent or more. Nine (19.1 percent) rural areas would 
increase by greater than or equal to 1 percent but less than 5 percent, 
and no rural areas would increase by 5 percent or more. However, the 
proposed wage index values for 185 (45.5 percent) urban areas and 23 
(48.9 percent) rural areas would decrease. Ninety-three (22.9 percent) 
urban areas would decrease by greater than or equal to 1 percent but 
less than 5 percent, and no urban areas would decrease by 5 percent or 
more. Eight (17.0 percent) rural areas would decrease by greater than 
or equal to 1 percent but less than 5 percent, and no rural areas would 
decrease by 5 percent or more. The largest positive impacts would be 
17.4 percent for an urban area and 2.7 percent for two rural areas. The 
largest negative impacts would be 4.7 percent for an urban area and 2.1 
percent for a rural area. No urban or rural areas would remain 
unchanged by application of the proposed occupational mix adjustment. 
These results indicate that a larger percentage of urban areas (54.5 
percent) would benefit from application of the proposed occupational 
mix adjustment than would rural areas (51.1 percent).

G. Transitional Wage Indexes

1. Background
    In the FY 2015 IPPS/LTCH PPS proposed rule and final rule (79 FR 
28060 and 49957, respectively), we stated that, overall, we believed 
implementing the new OMB labor market area delineations would result in 
wage index values being more representative of the actual costs of 
labor in a given area. However, we recognized that some hospitals would 
experience decreases in wage index values as a result of the 
implementation of these new OMB labor market area delineations. We also 
realized that some hospitals would have higher wage index values due to 
the implementation of the new OMB labor market area delineations.
    The FY 2015 IPPS/LTCH PPS final rule (79 FR 49957) explained the 
methodology utilized in implementing prior transition periods when 
adopting changes that have significant payment implications, 
particularly large negative impacts. Specifically, for FY 2005, in the 
FY 2005 IPPS final rule (69 FR 49032 through 49034), we provided 
transitional wage indexes when the OMB definitions were implemented 
after the 2000 Census. The FY 2015 IPPS/LTCH PPS final rule (79 FR 
49957 through 49962) established similar transition methodologies to 
mitigate any negative payment impacts experienced by hospitals due to 
our adoption of the new OMB labor market area delineations for FY 2015.
    As finalized in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49957 
through 49960) and as discussed below, for FY 2016, we are in the 
second year of two 3-year transition periods for wage index: one for 
hospitals that, for FY 2014, were located in an urban county that 
became rural under the new OMB delineations, and had no form of wage 
index reclassification or redesignation in place for FY 2015 (that is, 
MGCRB reclassifications under section 1886(d)(10) of the Act, 
redesignations under section 1886(d)(8)(B) of the Act, or rural 
reclassifications under section 1886(d)(8)(E) of the Act); and one for 
hospitals deemed urban under section 1886(d)(8)(B) of the Act where the 
urban area became rural under the new OMB delineations. In addition, 
the 1-year transition that we applied in FY 2015 for hospitals that 
experienced a decrease in wage index under the new OMB delineations 
expires at the end of FY 2015 and does not apply in FY 2016.
2. Transition for Hospitals in Urban Areas That Became Rural
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49957 through 
49959), for hospitals that, for FY 2014, were located in an urban 
county that became rural under the new OMB delineations, and had no 
form of wage index reclassification or redesignation in place for FY 
2015 (that is, MGCRB reclassifications under section 1886(d)(10) of the 
Act, redesignations under section 1886(d)(8)(B) of the Act, or rural 
reclassifications under section 1886(d)(8)(E) of the Act), we adopted a 
policy to assign them the urban wage index value of the CBSA in which 
they are physically located for FY 2014 for a period of 3 fiscal years 
(with the rural and imputed floors applied and with the rural floor 
budget neutrality adjustment applied to the area wage index). FY 2016 
will represent the second year of this transition policy, and we are 
not proposing any changes to this policy in this proposed rule. In the 
FY 2015 IPPS/LTCH PPS final rule (79 FR 49957), we stated our belief 
that it is appropriate to apply a 3-year transition period for 
hospitals located in urban counties that would become rural under the 
new OMB delineations, given the potentially significant payment impacts 
for these hospitals. We continue to believe that assigning the wage 
index of the hospitals' FY 2014 area for a 3-year transition is the 
simplest and most effective method for mitigating negative payment 
impacts due to the adoption of the new OMB delineations.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR49959), we noted that 
there were situations where a hospital could not be assigned the wage 
index value of the CBSA in which it geographically was located in FY 
2014 because that CBSA split and no longer exists and some or all of 
the constituent counties were added to another urban labor market area 
under the new OMB delineations. If the hospital could not be assigned 
the wage index value of the CBSA in which it was geographically located 
in FY 2014 because that CBSA split apart and no longer exists, and some 
or all of its constituent counties were added to another urban labor 
market area under the new OMB delineations, we established that 
hospitals located in such counties that became rural under the new OMB 
delineations were assigned the wage index of the urban labor market 
area that contains the urban county in their FY 2014 CBSA to which they 
are closest (with the rural and imputed floors applied and with the 
rural floor budget neutrality adjustment applied). Any such assignment 
made in FY 2015 will continue for FYs 2016 and 2017, except as 
discussed below. We continue to believe this approach minimizes the 
negative effects of the change in the OMB delineations.
    Under the policy adopted in the FY 2015 IPPS/LTCH PPS final rule, 
if a hospital for FY 2014 was located in an urban county that became 
rural for FY 2015 under the new OMB delineations and such hospital 
sought and was granted reclassification or redesignation for FY 2015 or 
such hospital seeks and is granted any reclassification or 
redesignation for FY 2016 or FY 2017, the hospital will permanently 
lose its 3-year transitional assigned wage index status, and will not 
be eligible to reinstate it. We established the transition policy to 
assist hospitals if they experience a negative payment

[[Page 24468]]

impact specifically due to the adoption of the new OMB delineations in 
FY 2015. If a hospital chooses to forego this transition adjustment by 
obtaining some form of reclassification or redesignation, we do not 
believe reinstatement of this transition adjustment would be 
appropriate. The purpose of the transition adjustment policy is to 
assist hospitals that may be negatively impacted by the new OMB 
delineations in transitioning to a wage index based on these 
delineations. By obtaining a reclassification or redesignation, we 
believe that the hospital has made the determination that the 
transition adjustment is not necessary because it has other viable 
options for mitigating the impact of the transition to the new OMB 
delineations.
    As we did for FY 2015 (79 FR 49959), with respect to the wage index 
computation for FY 2016, we will follow our existing policy regarding 
the inclusion of a hospital's wage index data in the CBSA in which it 
is geographically located (we refer readers to Step 6 of the method for 
computing the unadjusted wage index in the FY 2012 IPPS/LTCH PPS final 
rule (76 FR 51592)). Accordingly, as we began with FY 2015, for FY 
2016, the wage data of all hospitals receiving this type of 3-year 
transition adjustment will be included in the statewide rural area in 
which they are geographically located under the new OMB labor market 
area delineations. After the 3-year transition period, beginning in FY 
2018, these formerly urban hospitals discussed above will receive their 
statewide rural wage index, absent any reclassification or 
redesignation.
    In addition, we established in the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 49959) that the hospitals receiving this 3-year transition 
because they are in counties that were urban under the FY 2014 CBSA 
definitions, but are rural under the new OMB delineations, will not be 
considered urban hospitals. Rather, they will maintain their status as 
rural hospitals for other payment considerations. This is because our 
application of a 3-year transitional wage index for these newly rural 
hospitals only applies for the purpose of calculating the wage index 
under our adoption of the new OMB delineations. We did not establish 
transitions for other IPPS payment policies that may be impacted by our 
adoption of the new OMB delineations.
3. Transition for Hospitals Deemed Urban Under Section 1886(d)(8)(B) of 
the Act Where the Urban Area Became Rural Under the New OMB 
Delineations
    As discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49959 
through 49960), there were some hospitals that, for FY 2014, were 
geographically located in rural areas but were deemed to be urban under 
section 1886(d)(8)(B) of the Act. For FY 2015, some of these hospitals 
redesignated under section 1886(d)(8)(B) of the Act were no longer 
eligible for deemed urban status under the new OMB delineations, as 
discussed in detail in section III.H.3. of the preamble of the FY 2015 
IPPS/LTCH PPS final rule. Similar to the policy implemented in the FY 
2005 IPPS final rule (69 FR 49059), and consistent with the FY 2015 
policy we established for other hospitals in counties that were urban 
and became rural under the new OMB delineations, we finalized a policy 
to apply a 3-year transition to these hospitals redesignated to urban 
areas under section 1886(d)(8)(B) of the Act for FY 2014 that are no 
longer deemed urban under the new OMB delineations and revert to being 
rural.
    For FY 2016, we are not proposing any changes to this policy and 
will continue to the second year of the implementation of our policy to 
provide a 3-year transition adjustment to hospitals that are deemed 
urban under section 1886(d)(8)(B) of the Act under the FY 2014 labor 
market area delineations, but are considered rural under the new OMB 
delineations, assuming no other form of wage index reclassification or 
redesignation is granted. We assign these hospitals the area wage index 
value of hospitals reclassified to the urban CBSA (that is, the 
attaching wage index) to which they were redesignated in FY 2014 (with 
the rural and imputed floors applied and with the rural floor budget 
neutrality adjustment applied). If the hospital cannot be assigned the 
reclassified wage index value of the CBSA to which it was redesignated 
in FY 2014 because that CBSA was split apart and no longer exists, and 
some or all of its constituent counties were added to another urban 
labor market area under the new OMB delineations, such hospitals are 
assigned the wage index of the hospitals reclassified to the urban 
labor market area that contains the urban county in their FY 2014 
redesignated CBSA to which they are closest. We assign these hospitals 
the area wage index of hospitals reclassified to a CBSA because 
hospitals deemed urban under section 1886(d)(8)(B) of the Act are 
treated as reclassified under current policy, under which such 
hospitals receive an area wage index that includes wage data of all 
hospitals reclassified to the area. This wage index assignment will be 
forfeited if the hospital obtains any form of wage index 
reclassification or redesignation.
4. Expiring Transition for Hospitals That Experience a Decrease in Wage 
Index Under the New OMB Delineations
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49960 through 
49962), we stated that, while we believe that instituting the latest 
OMB labor market area delineations would create a more accurate wage 
index system, we also recognized that implementing the latest OMB 
delineations may cause some short-term instability in hospital 
payments. Therefore, in addition to the 3-year transition adjustments 
for hospitals being transitioned from urban to rural status as 
discussed earlier, in the FY 2015 IPPS/LTCH PPS final rule, we 
established a 1-year blended wage index for all hospitals that would 
experience any decrease in their actual payment wage index. This 1-year 
blended wage index expires at the end of FY 2015. We are not proposing 
any additional transition adjustment for hospitals that experienced a 
decrease in wage index values due to the adoption of the new OMB 
delineations for FY 2015 but, as discussed previously, will continue 
the 3-year transition adjustments for hospitals that changed from urban 
to rural status that we finalized in the FY 2015 IPPS/LTCH PPS final 
rule. We established a longer 3-year transition adjustment for 
hospitals losing urban status because there are significantly fewer 
affected urban-to-rural hospitals, and we believe the negative impacts 
to a hospital shifting from urban to rural status are typically greater 
than other types of transitions. We stated our belief that a transition 
period longer than 1 year to address other impacts of the adoption of 
the new OMB delineations would reduce the accuracy of the overall labor 
market area wage index system because far more hospitals would be 
affected. The 1-year transition for all negatively affected hospitals 
in FY 2015 provided an opportunity for hospitals to evaluate potential 
reclassification options, and mitigated initial negative impacts due to 
labor market assignment changes. We continue to believe that the 
adoption of the latest labor market delineations improves the accuracy 
and integrity of the hospital wage index system. Therefore, we believe 
it is necessary to allow this transition adjustment to expire.

[[Page 24469]]

5. Budget Neutrality
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50372 through 
50373), for FY 2015, we applied the 3-year transition and 50/50 blended 
wage index adjustments in a budget neutral manner. For FY 2016, we are 
proposing to apply the 3-year transition adjustments in a budget 
neutral manner. We are proposing to make an adjustment to the 
standardized amount to ensure that the total payments, including the 
effect of the transition provisions, would equal what payments would 
have been if we would not be providing for any transitional wage 
indexes under the new OMB delineations. For a complete discussion on 
the proposed budget neutrality adjustment for FY 2016, we refer readers 
to section II.A.4.b. of the Addendum to this proposed rule.

H. Proposed Application of the Proposed Rural, Imputed, and Frontier 
Floors

1. Proposed Rural Floor
    Section 4410(a) of Public Law 105-33 provides that, for discharges 
on or after October 1, 1997, the area wage index applicable to any 
hospital that is located in an urban area of a State may not be less 
than the area wage index applicable to hospitals located in rural areas 
in that State. This provision is referred to as the ``rural floor.'' 
Section 3141 of Public Law 111-148 also requires that a national budget 
neutrality adjustment be applied in implementing the rural floor. Based 
on the proposed FY 2016 wage index associated with this proposed rule, 
we estimated that 459 hospitals would receive an increase in their FY 
2016 proposed wage index due to the application of the rural floor.
2. Proposed Imputed Floor for FY 2016
    In the FY 2005 IPPS final rule (69 FR 49109 through 49111), we 
adopted the ``imputed floor'' policy as a temporary 3-year regulatory 
measure to address concerns from hospitals in all-urban States that 
have argued that they are disadvantaged by the absence of rural 
hospitals to set a wage index floor for those States. Since its initial 
implementation, we have extended the imputed floor policy five times, 
the last of which was adopted in the FY 2015 IPPS/LTCH PPS final rule 
and is set to expire on September 30, 2015. (We refer readers to 
further discussions of the imputed floor in the FY 2014 and FY 2015 
IPPS/LTCH PPS final rules (78 FR 50589 through 50590 and 79 FR 49969 
through 49970, respectively) and to the regulations at 42 CFR 
412.64(h)(4).) Currently, there are three all-urban States, Delaware, 
New Jersey, and Rhode Island, with a range of wage indexes assigned to 
hospitals in these States, including through reclassification or 
redesignation (we refer readers to discussions of geographic 
reclassifications and redesignations in section III.J. of the preamble 
of this proposed rule).
    In computing the imputed floor for an all-urban State under the 
original methodology, which was established beginning in FY 2005, we 
calculated the ratio of the lowest-to-highest CBSA wage index for each 
all-urban State as well as the average of the ratios of lowest-to-
highest CBSA wage indexes of those all-urban States. We then compared 
the State's own ratio to the average ratio for all-urban States and 
whichever is higher is multiplied by the highest CBSA wage index value 
in the State--the product of which established the imputed floor for 
the State. As of FY 2012, there were only two all-urban States, New 
Jersey and Rhode Island, and only New Jersey benefitted under this 
methodology. Under the previous OMB labor market area delineations, 
Rhode Island had only one CBSA (Providence-New Bedford-Fall River, RI-
MA) and New Jersey had 10 CBSAs. Therefore, under the original 
methodology, Rhode Island's own ratio equaled 1.0, and its imputed 
floor was equal to its original CBSA wage index value. However, because 
the average ratio of New Jersey and Rhode Island was higher than New 
Jersey's own ratio, this methodology provided a benefit for New Jersey, 
but not for Rhode Island.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53368 through 
53369), we retained the imputed floor calculated under the original 
methodology as discussed above, and established an alternative 
methodology for computing the imputed floor wage index to address the 
concern that the original imputed floor methodology guaranteed a 
benefit for one all-urban State with multiple wage indexes (New Jersey) 
but could not benefit the other all-urban State (Rhode Island). The 
alternative methodology for calculating the imputed floor was 
established using data from the application of the rural floor policy 
for FY 2013. Under the alternative methodology, we first determined the 
average percentage difference between the post-reclassified, pre-floor 
area wage index and the post-reclassified, rural floor wage index 
(without rural floor budget neutrality applied) for all CBSAs receiving 
the rural floor. (Table 2 (formerly Table 4D) associated with the FY 
2013 IPPS/LTCH PPS final rule, which is available via the Internet on 
the CMS Web site, included the CBSAs receiving a State's rural floor 
wage index.) The lowest post-reclassified wage index assigned to a 
hospital in an all-urban State having a range of such values then is 
increased by this factor, the result of which establishes the State's 
alternative imputed floor. We amended Sec.  412.64(h)(4) of the 
regulations to add new paragraphs to incorporate the finalized 
alternative methodology, and to make reference and date changes. In 
summary, for the FY 2013 wage index, we did not make any changes to the 
original imputed floor methodology at Sec.  412.64(h)(4) and, 
therefore, made no changes to the New Jersey imputed floor computation 
for FY 2013. Instead, for FY 2013, we adopted a second, alternative 
methodology for use in cases where an all-urban State has a range of 
wage indexes assigned to its hospitals, but the State cannot benefit 
under the original methodology.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50589 through 
50590), we extended the imputed floor policy (both the original 
methodology and the alternative methodology) for 1 additional year, 
through September 30, 2014, while we continued to explore potential 
wage index reforms.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49969 through 
49970), for FY 2015, we adopted a policy to extend the imputed floor 
policy (both the original methodology and alternative methodology) for 
another year, through September 30, 2015, as we continued to explore 
potential wage index reforms. In that final rule, we revised the 
regulations at Sec.  412.64(h)(4) and (h)(4)(vi) to reflect the 1-year 
extension of the imputed floor.
    As discussed in section III.B. of the preamble of that FY 2015 
final rule, we adopted the new OMB labor market area delineations 
beginning in FY 2015. Under the new OMB delineations, Delaware became 
an all-urban State, along with New Jersey and Rhode Island. Under the 
new OMB delineations, Delaware has three CBSAs, New Jersey has seven 
CBSAs, and Rhode Island continues to have only one CBSA (Providence-
Warwick, RI-MA). We refer readers to a detailed discussion of our 
adoption of the new OMB labor market area delineations in section 
III.B. of the preamble of the FY 2015 IPPS/LTCH PPS final rule. 
Therefore, under the adopted new OMB delineations discussed in section 
III.B. of the preamble of the FY 2015 IPPS/LTCH PPS final rule, 
Delaware became an all-urban State and was subject to an imputed floor 
as well for FY 2015.
    For FY 2016, we are proposing to extend the imputed floor policy 
(both the original methodology and the

[[Page 24470]]

alternative methodology) for 1 additional year, through September 30, 
2016, while we continue to explore potential wage index reforms. We are 
proposing to revise the regulations at Sec.  412.64(h)(4) and 
(h)(4)(vi) to reflect this proposed additional 1-year extension. We are 
inviting public comments on the proposed additional 1-year extension of 
the imputed floor through September 30, 2016.
    The wage index and impact tables associated with this FY 2016 IPPS/
LTCH PPS proposed rule (which are available via the Internet on the CMS 
Web site) reflect the proposed continued application of the imputed 
floor policy at Sec.  412.64(h)(4) and a proposed national budget 
neutrality adjustment for the imputed floor for FY 2016. There are 16 
providers in New Jersey, and no providers in Delaware that would 
receive an increase in their proposed FY 2016 wage index due to the 
proposed continued application of the imputed floor policy under the 
original methodology and 4 hospitals in Rhode Island that would benefit 
under the alternative methodology.
3. Proposed State Frontier Floor
    Section 10324 of Public Law 111-148 requires that hospitals in 
frontier States cannot be assigned a wage index of less than 1.0000 (we 
refer readers to regulations at 42 CFR 412.64(m) and to a discussion of 
the implementation of this provision in the FY 2011 IPPS/LTCH PPS final 
rule (75 FR 50160 through 50161)). Forty-seven hospitals would receive 
the frontier floor value of 1.0000 for their FY 2016 wage index in this 
proposed rule. These hospitals are located in Montana, North Dakota, 
South Dakota, and Wyoming. Although Nevada also is defined as a 
frontier State, its proposed FY 2016 rural floor value of 1.0300 is 
greater than 1.0000, and therefore, no Nevada hospitals would receive a 
frontier floor value for their FY 2016 wage index. We are not proposing 
any changes to the frontier floor policy for FY 2016.
    The areas affected by the proposed rural, imputed, and frontier 
floor policies for the proposed FY 2016 wage index are identified in 
Table 2 (formerly Table 4D) associated with this proposed rule, which 
is available via the Internet on the CMS Web site.

I. Proposed FY 2016 Wage Index Tables

    We are proposing to streamline and consolidate the wage index 
tables associated with the IPPS proposed and final rules for FY 2016 
and subsequent fiscal years. The wage index tables have consisted of 12 
tables (Tables 2, 3A, 3B, 4A, 4B, 4C, 4D, 4E, 4F, 4J, 9A, and 9C) that 
are made available via the Internet on the CMS Web site. However, with 
the exception of Table 4E, we are proposing to streamline and 
consolidate these 11 tables into 2 tables. We refer readers to section 
VI. of the Addendum to this proposed rule for a discussion of the 
proposed revisions to the wage index tables.

J. Revisions to the Wage Index Based on Hospital Redesignations and 
Reclassifications

1. General Policies and Effects of Reclassification and Redesignation
    Under section 1886(d)(10) of the Act, the MGCRB considers 
applications by hospitals for geographic reclassification for purposes 
of payment under the IPPS. Hospitals must apply to the MGCRB to 
reclassify not later than 13 months prior to the start of the fiscal 
year for which reclassification is sought (generally by September 1). 
Generally, hospitals must be proximate to the labor market area to 
which they are seeking reclassification and must demonstrate 
characteristics similar to hospitals located in that area. The MGCRB 
issues its decisions by the end of February for reclassifications that 
become effective for the following fiscal year (beginning October 1). 
The regulations applicable to reclassifications by the MGCRB are 
located in 42 CFR 412.230 through 412.280. (We refer readers to a 
discussion in the FY 2002 IPPS/LTCH PPS final rule (66 FR 39874 and 
39875) regarding how the MGCRB defines mileage for purposes of the 
proximity requirements.) The general policies for reclassifications and 
redesignations that we are proposing for FY 2016, and the policies for 
the effects of hospitals' reclassifications and redesignations on the 
wage index, are the same as those discussed in the FY 2012 IPPS/LTCH 
PPS final rule for the FY 2012 final wage index (76 FR 51595 and 
51596). In addition, in the FY 2012 IPPS/LTCH PPS final rule, we 
discussed the effects on the wage index of urban hospitals 
reclassifying to rural areas under 42 CFR 412.103. Hospitals that are 
geographically located in States without any rural areas are ineligible 
to apply for rural reclassification in accordance with the provisions 
of 42 CFR 412.103.
2. FY 2016 MGCRB Reclassifications
a. FY 2016 Reclassification Requirements and Approvals
    Under section 1886(d)(10) of the Act, the MGCRB considers 
applications by hospitals for geographic reclassification for purposes 
of payment under the IPPS. The specific procedures and rules that apply 
to the geographic reclassification process are outlined in regulations 
under 42 CFR 412.230 through 412.280.
    At the time this proposed rule was constructed, the MGCRB had 
completed its review of FY 2016 reclassification requests. Based on 
such reviews, there are 285 hospitals approved for wage index 
reclassifications by the MGCRB starting in FY 2016. Because MGCRB wage 
index reclassifications are effective for 3 years, for FY 2016, 
hospitals reclassified beginning in FY 2014 or FY 2015 are eligible to 
continue to be reclassified to a particular labor market area based on 
such prior reclassifications for the remainder of their 3-year period. 
There were 275 hospitals approved for wage index reclassifications in 
FY 2014 that continue for FY 2016, and 312 hospitals approved for wage 
index reclassifications in FY 2015 that continue for FY 2016. Of all 
the hospitals approved for reclassification for FY 2014, FY 2015, and 
FY 2016, based upon the review at the time of this proposed rule, 872 
hospitals are in a reclassification status for FY 2016.
    Under the regulations at 42 CFR 412.273, hospitals that have been 
reclassified by the MGCRB are permitted to withdraw their applications 
within 45 days of the publication of a proposed rule. For information 
about withdrawing, terminating, or canceling a previous withdrawal or 
termination of a 3-year reclassification for wage index purposes, we 
refer readers to 42 CFR 412.273, as well as the FY 2002 IPPS final rule 
(66 FR 39887 through 39888) and the FY 2003 IPPS final rule (67 FR 
50065 through 50066). Additional discussion on withdrawals and 
terminations, and clarifications regarding reinstating 
reclassifications and ``fallback'' reclassifications, were included in 
the FY 2008 IPPS final rule (72 FR 47333).
    Changes to the wage index that result from withdrawals of requests 
for reclassification, terminations, wage index corrections, appeals, 
and the Administrator's review process for FY 2016 will be incorporated 
into the wage index values published in the FY 2016 IPPS/LTCH PPS final 
rule. These changes affect not only the wage index value for specific 
geographic areas, but also the wage index value that redesignated/
reclassified hospitals receive; that is, whether they receive the wage 
index that includes the data for both the hospitals already in the area 
and the redesignated/reclassified hospitals. Further, the wage index 
value for the area from which the hospitals are redesignated/
reclassified may be affected.

[[Page 24471]]

b. Applications for Reclassifications for FY 2017
    Applications for FY 2017 reclassifications are due to the MGCRB by 
September 1, 2015 (the first working day of September 2015). We note 
that this is also the deadline for canceling a previous wage index 
reclassification withdrawal or termination under 42 CFR 412.273(d). 
Applications and other information about MGCRB reclassifications may be 
obtained, beginning in mid-July 2015, via the Internet on the CMS Web 
site at: http://cms.gov/Regulations-andGuidance/Review-Boards/MGCRB/index.html, or by calling the MGCRB at (410) 786-1174. The mailing 
address of the MGCRB is: 2520 Lord Baltimore Drive, Suite L, Baltimore, 
MD 21244-2670.
3. Redesignation of Hospitals Under Section 1886(d)(8)(B) of the Act
    Section 1886(d)(8)(B)(i) of the Act requires the Secretary to treat 
a hospital located in a rural county adjacent to one or more urban 
areas as being located in the urban metropolitan statistical area to 
which the greatest number of workers in the county commute if certain 
adjacency and commuting criteria are met. The criteria utilize 
standards for designating Metropolitan Statistical Areas published in 
the Federal Register by the Director of the Office of Management and 
Budget (OMB) based on the most recently available decennial population 
data. Effective beginning FY 2015, we used the new OMB delineations 
based on the 2010 Decennial Census data to identify counties in which 
hospitals qualify under section 1886(d)(8)(B) of the Act to receive the 
wage index of the urban area. Hospitals located in these counties are 
referred to as ``Lugar'' hospitals and the counties themselves are 
often referred to as ``Lugar'' counties. The chart for this FY 2016 
proposed rule with the listing of the rural counties containing the 
hospitals designated as urban under section 1886(d)(8)(B) of the Act is 
available via the Internet on the CMS Web site.
4. Waiving Lugar Redesignation for the Out-Migration Adjustment
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51599 through 
51600), we adopted the policy that, beginning with FY 2012, an eligible 
hospital that waives its Lugar status in order to receive the out-
migration adjustment has effectively waived its deemed urban status 
and, thus, is rural for all purposes under the IPPS, including being 
considered rural for the DSH payment adjustment, effective for the 
fiscal year in which the hospital receives the out-migration 
adjustment. (We refer readers to a discussion of DSH payment adjustment 
under section IV.D. of the preamble of this proposed rule.)
    In addition, we adopted a minor procedural change in that rule that 
allows a Lugar hospital that qualifies for and accepts the out-
migration adjustment (through written notification to CMS within 45 
days from the publication of the proposed rule) to waive its urban 
status for the full 3-year period for which its out-migration 
adjustment is effective. By doing so, such a Lugar hospital would no 
longer be required during the second and third years of eligibility for 
the out-migration adjustment to advise us annually that it prefers to 
continue being treated as rural and receive the out-migration 
adjustment. Therefore, under the procedural change, a Lugar hospital 
that requests to waive its urban status in order to receive the rural 
wage index in addition to the out-migration adjustment would be deemed 
to have accepted the out-migration adjustment and agrees to be treated 
as rural for the duration of its 3-year eligibility period, unless, 
prior to its second or third year of eligibility, the hospital 
explicitly notifies CMS in writing, within the required period 
(generally 45 days from the publication of the proposed rule), that it 
instead elects to return to its deemed urban status and no longer 
wishes to accept the out-migration adjustment. If the hospital does 
notify CMS that it is electing to return to its deemed urban status, it 
would again be treated as urban for all IPPS payment purposes.
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51599 through 51600) for a detailed discussion of the policy and 
process for waiving Lugar status for the out-migration adjustment.

K. Proposed Out-Migration Adjustment Based on Commuting Patterns of 
Hospital Employees

1. Background
    In accordance with section 1886(d)(13) of the Act, as added by 
section 505 of Public Law 108-173, beginning with FY 2005, we 
established a process to make adjustments to the hospital wage index 
based on commuting patterns of hospital employees (the ``out-
migration'' adjustment). The process, outlined in the FY 2005 IPPS 
final rule (69 FR 49061), provides for an increase in the wage index 
for hospitals located in certain counties that have a relatively high 
percentage of hospital employees who reside in the county but work in a 
different county (or counties) with a higher wage index.
2. New Data Source for the Proposed FY 2016 Out-Migration Adjustment
    When the provision of section 1886(d)(13) of the Act was 
implemented for the FY 2005 wage index, we analyzed commuting data 
compiled by the U.S. Census Bureau which was derived from a special 
tabulation of the 2000 Census journey-to-work data for all industries 
(CMS extracted data applicable to hospitals). These data were compiled 
from responses to the ``long-form'' survey, which the Census Bureau 
used at the time and which contained questions on where residents in 
each county worked (69 FR 49062). However, the 2010 Census was ``short 
form'' only; information on where residents in each county worked was 
not collected as part of the 2010 Census. The Census Bureau worked with 
CMS to provide an alternative dataset based on the latest available 
data on where residents in each county worked in 2010, for use in 
developing a new out-migration adjustment based on new commuting 
patterns developed from the 2010 Census data beginning with FY 2016. We 
have reviewed and analyzed the alternative dataset from the Census 
Bureau and are proposing new out-migration adjustments in this FY 2016 
proposed rule, as discussed below (as we indicated we would in the FY 
2015 IPPS/LTCH PPS final rule (79 FR 49984 through 49985).
    To determine the new out-migration adjustments and applicable 
counties that we are proposing for FY 2016, we analyzed commuting data 
compiled by the Census Bureau that were derived from a custom 
tabulation of the American Community Survey (ACS), an official Census 
Bureau survey, utilizing 2008 through 2012 (5-Year) Microdata. The data 
were compiled from responses to the ACS questions regarding the county 
where workers reside and the county to which workers commute. The 
tabulation was specific to hospital military and civilian employees 
(hospital sector Census code 8190/NAICS code 622) who worked in the 50 
States, Washington, DC, and Puerto Rico and, therefore, provided 
information about commuting patterns of workers at the county level for 
residents of the 50 States, Washington, DC, and Puerto Rico. For the 
ACS, the Census Bureau selects a random sample of addresses where 
workers reside to be included in the survey, and the sample is designed 
to ensure good geographic coverage. The ACS samples approximately 3.54 
million resident addresses per year. The results of the ACS are used to 
formulate

[[Page 24472]]

descriptive population estimates, and, as such, the sample on which the 
dataset is based represents the actual figures that would be obtained 
from a complete count.
3. Proposed FY 2016 Out-Migration Adjustment
    Section 1886(d)(13)(B) of the Act requires the Secretary to use 
data the Secretary determines to be appropriate to establish the 
qualifying counties. For FY 2016 and subsequent years, until such time 
that CMS finalizes out-migration adjustments based on the next Census, 
we are proposing that the out-migration adjustment be based on the data 
derived from the custom tabulation of the ACS described in section 
III.K.2. of the preamble of this proposed rule. As discussed above, we 
believe that these data are the most appropriate to establish 
qualifying counties because they are the most accurate and up-to-date 
data that are available to us. We are proposing that the FY 2016 out-
migration adjustments continue to be based on the same policies, 
procedures, and computation that were used for the FY 2012 out-
migration adjustment. We have applied these same policies, procedures, 
and computations since FY 2012 and we believe they continue to be 
appropriate for FY 2016. (We refer readers to a full discussion of the 
out-migration adjustment, including rules on deeming hospitals 
reclassified under section 1886(d)(8) or section 1886(d)(10) of the Act 
to have waived the out-migration adjustment, in the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51601 through 51602).) Table 2 (formerly Table 
4J) associated with this proposed rule (which is available via the 
Internet on the CMS Web site) lists the proposed out-migration 
adjustments for the FY 2016 wage index.
4. Use of Out-Migration Adjustment Data Applied for FY 2014 or FY 2015 
for 3 Years
    Section 1886(d)(13)(F) of the Act states that a wage index increase 
under this paragraph shall be effective for a period of 3 fiscal years, 
except that the Secretary shall establish procedures under which a 
subsection (d) hospital may elect to waive the application of such wage 
index increase. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49984 
through 49985), we stated that even if we proposed to adopt new out-
migration adjustment data for FY 2016, hospitals that are already 
receiving an out-migration adjustment beginning with a fiscal year 
prior to FY 2016 would still receive their out-migration adjustment 
based on the data used prior to FY 2016 for the years that remain of 
their 3-year qualification period in FY 2016 and after. Therefore, for 
FY 2016, hospitals that qualified in FY 2014 or FY 2015 to receive the 
out-migration adjustment based on the commuting data and the CBSA 
delineations used for FY 2014 will continue to receive the same out-
migration adjustment for the remainder of their 3-year qualification 
period. For example, if a hospital qualified for the out-migration 
adjustment in FY 2014, but also would qualify in FY 2016 under the 
proposed new commuting patterns and the new OMB labor market area 
delineations for FY 2016, this hospital will still receive the out-
migration adjustment based on the commuting data and the CBSA 
delineations used for FY 2014, regardless of whether the FY 2016 
adjustment would be higher or lower than the adjustment based on FY 
2014 data. If the hospital qualifies in FY 2017 (after the expiration 
of the 3-year qualifying period for the out-migration adjustment, which 
began in FY 2014) to receive the out-migration adjustment based on the 
new commuting data and OMB delineations in effect in FY 2017, it could 
receive the out-migration adjustment based on the new data for FYs 
2017, 2018, and 2019. Conversely, for example, if a hospital qualified 
for the out-migration adjustment in FY 2014, but would not qualify in 
FY 2016 under the proposed new commuting patterns and the new OMB 
delineations for FY 2016, this hospital will still receive the out-
migration adjustment based on the commuting data and the CBSA 
delineations used for FY 2014.
    Based on the new out-migration adjustment data used for this 
proposed rule, 325 hospitals would receive the out-migration adjustment 
for FY 2016. Of hospitals that were eligible for the out-migration 
adjustment for FY 2015 but whose 3-year qualifying period for the out-
migration adjustment expired, 5 hospitals are no longer eligible for 
the out-migration adjustment under the new data (3 hospitals in 
Alabama, 1 hospital in Missouri, and 1 hospital in Ohio). Of the 325 
hospitals, the out-migration adjustment of 243 hospitals would be 
unaffected, as these hospitals would receive the same out-migration 
adjustment because they are still within an existing 3-year eligibility 
period under the previous out-migration adjustment data. Of the 243 
hospitals, 8 hospitals would have received a higher out-migration 
adjustment using the new data (1 hospital in Alabama, 2 hospitals in 
Massachusetts, 1 hospital in Michigan, and 4 hospitals in Pennsylvania) 
and 4 hospitals would have received a lower out-migration using the new 
data (1 hospital in Idaho, 2 hospitals in Oregon, and 1 hospital in 
South Carolina). Eighty-two hospitals would be newly eligible for the 
out-migration adjustment in FY 2016 using the new data. The following 
table shows the States and Territory in which the 82 affected hospitals 
are located:

------------------------------------------------------------------------
                                                             Number of
                                                          hospitals that
                                                          would be newly
                          State                           eligible under
                                                           the new out-
                                                          migration data
                                                            for FY 2016
------------------------------------------------------------------------
Alabama.................................................               2
Arizona.................................................               2
California..............................................               6
Florida.................................................               3
Georgia.................................................               8
Idaho...................................................               1
Illinois................................................               1
Indiana.................................................               3
Kansas..................................................               1
Louisiana...............................................               5
Maine...................................................               1
Massachusetts...........................................               0
Michigan................................................               2
Minnesota...............................................               1
Mississippi.............................................               3
Missouri................................................               1
North Carolina..........................................               4
Ohio....................................................               4
Oklahoma................................................               2
Oregon..................................................               0
Pennsylvania............................................               3
Puerto Rico.............................................               5
South Carolina..........................................               1
Tennessee...............................................               4
Texas...................................................               6
Vermont.................................................               1
Washington..............................................               5
West Virginia...........................................               4
Wisconsin...............................................               3
                                                         ---------------
    Totals..............................................              82
------------------------------------------------------------------------

L. Process for Requests for Wage Index Data Corrections

    The preliminary, unaudited Worksheet S-3 wage data files for the 
proposed FY 2016 wage index were made available on May 23, 2014, and 
the preliminary CY 2013 occupational mix data files on July 11, 2014, 
through the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY-2016-Wage-Index-Home-Page.html.
    In the interest of meeting the data needs of the public, beginning 
with the proposed FY 2009 wage index, we post an additional public use 
file on our Web site that reflects the actual data that are used in 
computing the proposed wage index. The release of this file does not 
alter the current wage index process or schedule. We notify the 
hospital

[[Page 24473]]

community of the availability of these data as we do with the current 
public use wage data files through our Hospital Open Door Forum. We 
encourage hospitals to sign up for automatic notifications of 
information about hospital issues and about the dates of the Hospital 
Open Door Forums at the CMS Web site at: http://www.cms.gov/Outreach-and-Education/Outreach/OpenDoorForums/index.html.
    In a memorandum dated April 7, 2014, we instructed all MACs to 
inform the IPPS hospitals they service of the availability of the wage 
index data files and the process and timeframe for requesting revisions 
(including the specific deadlines listed below). We also instructed the 
MACs to advise hospitals that these data were also made available 
directly through their representative hospital organizations.
    If a hospital wished to request a change to its data as shown in 
the May 23, 2014 wage data files and July 11, 2014 occupational mix 
data files, the hospital was to submit corrections along with complete, 
detailed supporting documentation to its MAC by October 6, 2014. 
Hospitals were notified of this deadline and of all other deadlines and 
requirements, including the requirement to review and verify their data 
as posted in the preliminary wage index data files on the Internet, 
through the April 7, 2014 memorandum referenced above.
    The MACs notified the hospitals by mid-February 2015 of any changes 
to the wage index data as a result of the desk reviews and the 
resolution of the hospitals' early-October revision requests. The MACs 
also submitted the revised data to CMS by December 16, 2014. CMS 
published the proposed wage index public use files that included 
hospitals' revised wage index data on February 13, 2015. Hospitals had 
until March 2, 2015, to submit requests to the MACs for reconsideration 
of adjustments made by the MACs as a result of the desk review, and to 
correct errors due to CMS' or the MAC's mishandling of the wage index 
data. Hospitals also were required to submit sufficient documentation 
to support their requests.
    After reviewing requested changes submitted by hospitals, MACs were 
required to transmit to CMS any additional revisions resulting from the 
hospitals' reconsideration requests by April 8, 2015. The deadline for 
a hospital to request CMS intervention in cases where the hospital 
disagreed with the MAC's policy interpretations was April 15, 2015. We 
note that, as we did for the FY 2015 wage index, for the FY 2016 wage 
index, in accordance with the FY 2016 wage index timeline posted on the 
CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FY2016-WI-Time-Table-Final.pdf, the 
April appeals had to be sent via mail and email. We refer readers to 
the wage index timeline for complete details.
    Hospitals should examine Table 2, which is listed in section VI. of 
the Addendum to this proposed rule and available via the Internet on 
the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY-2016-Wage-Index-Home-Page.html. Table 2 contains each hospital's proposed 
adjusted average hourly wage used to construct the wage index values 
for the past 3 years, including the FY 2012 data used to construct the 
proposed FY 2016 wage index. We noted that the proposed hospital 
average hourly wages shown in Table 2 only reflect changes made to a 
hospital's data that were transmitted to CMS by February 27, 2015.
    We will release the final wage index data public use files on May 
1, 2015 on the Internet at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Wage-Index-Files-Items/FY-2016-Wage-Index-Home-Page.html. The May 2015 public use files are made 
available solely for the limited purpose of identifying any potential 
errors made by CMS or the MAC in the entry of the final wage index data 
that resulted from the correction process described above (revisions 
submitted to CMS by the MACs by April 8, 2015).
    After the release of the May 2015 wage index data files, changes to 
the wage and occupational mix data will only be made in those very 
limited situations involving an error by the MAC or CMS that the 
hospital could not have known about before its review of the final wage 
index data files. Specifically, neither the MAC nor CMS will approve 
the following types of requests:
     Requests for wage index data corrections that were 
submitted too late to be included in the data transmitted to CMS by the 
MACs on or before April 8, 2015.
     Requests for correction of errors that were not, but could 
have been, identified during the hospital's review of the February 13, 
2015 wage index public use files.
     Requests to revisit factual determinations or policy 
interpretations made by the MAC or CMS during the wage index data 
correction process.
    If, after reviewing the May 2015 final public use files, a hospital 
believes that its wage or occupational mix data are incorrect due to a 
MAC or CMS error in the entry or tabulation of the final data, the 
hospital should notify both its MAC and CMS regarding why the hospital 
believes an error exists and provide all supporting information, 
including relevant dates (for example, when it first became aware of 
the error). The hospital is required to send its request to CMS and to 
the MAC no later than June 1, 2015. Similar to the April appeals, 
beginning with the FY 2015 wage index, in accordance with the FY 2016 
wage index timeline posted on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/Downloads/FY2016-WI-Time-Table-Final.pdf, the June appeals are required to be 
sent via mail and email to CMS and the MACs. We refer readers to the 
wage index timeline for complete details.
    Verified corrections to the wage index data received timely by CMS 
and the MACs (that is, by June 1, 2015) will be incorporated into the 
final wage index in the FY 2016 IPPS/LTCH PPS final rule, which will be 
effective October 1, 2015.
    We created the processes described above to resolve all substantive 
wage index data correction disputes before we finalize the wage and 
occupational mix data for the FY 2016 payment rates. Accordingly, 
hospitals that do not meet the procedural deadlines set forth above 
will not be afforded a later opportunity to submit wage index data 
corrections or to dispute the MAC's decision with respect to requested 
changes. Specifically, our policy is that hospitals that do not meet 
the procedural deadlines set forth above will not be permitted to 
challenge later, before the PRRB, the failure of CMS to make a 
requested data revision. We refer readers also to the FY 2000 IPPS 
final rule (64 FR 41513) for a discussion of the parameters for appeals 
to the PRRB for wage index data corrections.
    Again, we believe the wage index data correction process described 
above provides hospitals with sufficient opportunity to bring errors in 
their wage and occupational mix data to the MAC's attention. Moreover, 
because hospitals have access to the final wage index data by May 1, 
2015, they have the opportunity to detect any data entry or tabulation 
errors made by the MAC or CMS before the development and publication of 
the final FY 2016 wage index by August 2015, and the implementation of 
the FY 2016 wage index on October 1, 2015. Given these processes, the 
wage index implemented on October 1 should be accurate. Nevertheless, 
in the event that errors are

[[Page 24474]]

identified by hospitals and brought to our attention after June 1, 
2015, we retain the right to make midyear changes to the wage index 
under very limited circumstances.
    Specifically, in accordance with 42 CFR 412.64(k)(1) of our 
regulations, we make midyear corrections to the wage index for an area 
only if a hospital can show that: (1) The MAC or CMS made an error in 
tabulating its data; and (2) the requesting hospital could not have 
known about the error or did not have an opportunity to correct the 
error, before the beginning of the fiscal year. For purposes of this 
provision, ``before the beginning of the fiscal year'' means by the 
June deadline for making corrections to the wage data for the following 
fiscal year's wage index (for example, June 1, 2015, for the FY 2016 
wage index). This provision is not available to a hospital seeking to 
revise another hospital's data that may be affecting the requesting 
hospital's wage index for the labor market area. As indicated earlier, 
because CMS makes the wage index data available to hospitals on the CMS 
Web site prior to publishing both the proposed and final IPPS rules, 
and the MACs notify hospitals directly of any wage index data changes 
after completing their desk reviews, we do not expect that midyear 
corrections will be necessary. However, under our current policy, if 
the correction of a data error changes the wage index value for an 
area, the revised wage index value will be effective prospectively from 
the date the correction is made.
    In the FY 2006 IPPS final rule (70 FR 47385 through 47387 and 
47485), we revised 42 CFR 412.64(k)(2) to specify that, effective on 
October 1, 2005, that is, beginning with the FY 2006 wage index, a 
change to the wage index can be made retroactive to the beginning of 
the Federal fiscal year only when CMS determines all of the following: 
(1) The MAC or CMS made an error in tabulating data used for the wage 
index calculation; (2) the hospital knew about the error and requested 
that the MAC and CMS correct the error using the established process 
and within the established schedule for requesting corrections to the 
wage index data, before the beginning of the fiscal year for the 
applicable IPPS update (that is, by the June 1, 2015 deadline for the 
FY 2016 wage index); and (3) CMS agreed before October 1 that the MAC 
or CMS made an error in tabulating the hospital's wage index data and 
the wage index should be corrected.
    In those circumstances where a hospital requested a correction to 
its wage index data before CMS calculated the final wage index (that 
is, by the June 1, 2015 deadline for the FY 2016 wage index), and CMS 
acknowledges that the error in the hospital's wage index data was 
caused by CMS' or the MAC's mishandling of the data, we believe that 
the hospital should not be penalized by our delay in publishing or 
implementing the correction. As with our current policy, we indicated 
that the provision is not available to a hospital seeking to revise 
another hospital's data. In addition, the provision cannot be used to 
correct prior years' wage index data; and it can only be used for the 
current Federal fiscal year. In situations where our policies would 
allow midyear corrections other than those specified in 42 CFR 
412.64(k)(2)(ii), we continue to believe that it is appropriate to make 
prospective-only corrections to the wage index.
    We note that, as with prospective changes to the wage index, the 
final retroactive correction will be made irrespective of whether the 
change increases or decreases a hospital's payment rate. In addition, 
we note that the policy of retroactive adjustment will still apply in 
those instances where a final judicial decision reverses a CMS denial 
of a hospital's wage index data revision request.

M. Labor-Related Share for the Proposed FY 2016 Wage Index

    Section 1886(d)(3)(E) of the Act directs the Secretary to adjust 
the proportion of the national prospective payment system base payment 
rates that are attributable to wages and wage-related costs by a factor 
that reflects the relative differences in labor costs among geographic 
areas. It also directs the Secretary to estimate from time to time the 
proportion of hospital costs that are labor-related: ``The Secretary 
shall adjust the proportion (as estimated by the Secretary from time to 
time) of hospitals' costs which are attributable to wages and wage-
related costs of the DRG prospective payment rates. . . .'' We refer to 
the portion of hospital costs attributable to wages and wage-related 
costs as the labor-related share. The labor-related share of the 
prospective payment rate is adjusted by an index of relative labor 
costs, which is referred to as the wage index.
    Section 403 of Public Law 108-173 amended section 1886(d)(3)(E) of 
the Act to provide that the Secretary must employ 62 percent as the 
labor-related share unless this ``would result in lower payments to a 
hospital than would otherwise be made.'' However, this provision of 
Public Law 108-173 did not change the legal requirement that the 
Secretary estimate ``from time to time'' the proportion of hospitals' 
costs that are ``attributable to wages and wage-related costs.'' Thus, 
hospitals receive payment based on either a 62-percent labor-related 
share, or the labor-related share estimated from time to time by the 
Secretary, depending on which labor-related share resulted in a higher 
payment.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50596 through 
50607), we rebased and revised the hospital market basket. We 
established a FY 2010-based IPPS hospital market basket to replace the 
FY 2006-based IPPS hospital market basket, effective October 1, 2013. 
In that final rule, we presented our analysis and conclusions regarding 
the frequency and methodology for updating the labor-related share for 
FY 2014. Using the FY 2010-based IPPS market basket, we finalized a 
labor-related share for FY 2014 and for FY 2015 of 69.6 percent. In 
addition, we implemented this revised and rebased labor-related share 
in a budget neutral manner. However, consistent with section 
1886(d)(3)(E) of the Act, we did not take into account the additional 
payments that would be made as a result of hospitals with a wage index 
less than or equal to 1.0000 being paid using a labor-related share 
lower than the labor-related share of hospitals with a wage index 
greater than 1.0000.
    The labor-related share is used to determine the proportion of the 
national IPPS base payment rate to which the area wage index is 
applied. In this proposed rule, for FY 2016, we are not proposing to 
make any further changes to the national average proportion of 
operating costs that are attributable to wages and salaries, employee 
benefits, contract labor, the labor-related portion of professional 
fees, administrative and facilities support services, and all other 
labor-related services. Therefore, for FY 2016, we are proposing to 
continue to use a labor-related share of 69.6 percent for discharges 
occurring on or after October 1, 2015.
    Tables 1A and 1B, which are published in section VI. of the 
Addendum to this proposed rule and available via the Internet on the 
CMS Web site, reflect this proposed labor-related share. For FY 2016, 
for all IPPS hospitals whose wage indexes are less than or equal to 
1.0000, we are proposing to apply the wage index to a labor-related 
share of 62 percent of the national standardized amount. For all IPPS 
hospitals whose wage indexes are greater than 1.0000, for FY 2016, we 
are proposing to apply the wage index to a proposed labor-related share 
of 69.6 percent of the national standardized amount. We note that, for 
Puerto Rico

[[Page 24475]]

hospitals, the national labor-related share is 62 percent because the 
national wage index for all Puerto Rico hospitals is less than 1.0000.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50601 through 
50603), we also rebased and revised the labor-related share for the 
Puerto Rico-specific standardized amounts using FY 2010 as a base year. 
We finalized a labor-related share for the Puerto Rico-specific 
standardized amounts for FY 2014 of 63.2 percent. In the FY 2015 IPPS/
LTCH PPS final rule (79 FR 49990), for FY 2015, we did not make any 
further changes to the Puerto Rico specific average proportion of 
operating costs that are attributable to wages and salaries, employee 
benefits, contract labor, the labor-related portion of professional 
fees, administrative and facilities support services, and all other 
labor-related services. For FY 2015, we continued to use a labor-
related share for the Puerto Rico-specific standardized amounts of 63.2 
percent for discharges occurring on or after October 1, 2014.
    For FY 2016, we are proposing to continue to use a labor-related 
share for the Puerto Rico-specific standardized amounts of 63.2 percent 
for discharges occurring on or after October 1, 2015. Puerto Rico 
hospitals are paid based on 75 percent of the national standardized 
amounts and 25 percent of the Puerto Rico-specific standardized 
amounts. For FY 2016, we are proposing that the labor-related share of 
a hospital's Puerto Rico-specific rate would be either the Puerto Rico-
specific labor-related share of 63.2 percent or 62 percent, depending 
on which results in higher payments to the hospital. If the hospital 
has a proposed Puerto Rico-specific wage index greater than 1.000 for 
FY 2016, we are proposing to set the hospital's rates using a labor-
related share of 63.2 percent for the 25 percent portion of the 
hospital's payment determined by the Puerto Rico standardized amounts 
because this amount would result in higher payments. Conversely, a 
hospital with a proposed Puerto Rico-specific wage index of less than 
or equal to 1.000 for FY 2016 would be paid using the Puerto Rico-
specific labor-related share of 62 percent of the Puerto Rico-specific 
rates because the lower labor-related share would result in higher 
payments. The proposed Puerto Rico labor-related share of 63.2 percent 
for FY 2016 is reflected in Table 1C, which is published in section VI. 
of the Addendum to this proposed rule and available via the Internet on 
the CMS Web site.

N. Proposed Changes to 3-Year Average Pension Policy and Proposed 
Changes to the Wage Index Timetable Regarding Pension Costs for FY 2017 
and Subsequent Years

    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586 through 
51590), we revised our policy for reporting costs of qualified defined 
benefit pension plans for the Medicare wage index. Under that revised 
policy, the pension costs that are to be included in the wage index 
equal a hospital's average cash contributions deposited to its defined 
benefit pension plan over a 3-year period or, if less than a 3-year 
period, the number of years that the hospital has sponsored a defined 
benefit plan. The 3-year average is centered on the base cost reporting 
period for the wage index. For example, the FY 2016 wage index will be 
based on Medicare cost reporting periods beginning during Federal FY 
2012, and will reflect the average pension contributions made in a 
hospital's cost reporting period that began during Federal FYs 2011, 
2012, and 2013. As stated in the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51587), we centered the 3-year average on the base cost reporting 
period for the wage index in order to ensure that the average annual 
pension cost reflected in the wage index is consistent with the cost 
reporting period applicable to all other costs included in the index. 
We also stated that we did not anticipate that the use of contributions 
made in the period immediately following the base cost reporting period 
(for example, using Federal FY 2013 as one of the 3-year periods for FY 
2016) would create an administrative burden because by the time the MAC 
would be reviewing a hospital's base cost reporting period wage data 
for inclusion in the subsequent year's wage index, trust account 
statements and general ledger reports to support the contributions 
should be readily available. We refer readers to the FY 2012 IPPS/LTCH 
PPS final rule for a complete discussion of this policy.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49987 through 
49990), we finalized changes to the FY 2017 wage index timeline. We 
stated that we believed the timeline changes would not only improve the 
accuracy of the February public use file (PUF), but also would reduce 
the number of hospital appeals based on the February PUF. Among these 
changes to the wage index timeline for FY 2017 is a requirement that 
hospitals must request revisions to the preliminary PUF by the first 
week of September 2015. In response to our FY 2015 proposal to change 
the wage index timeline for FY 2017, a public commenter stated that the 
proposed FY 2017 deadline of early August 2015 did not provide enough 
time for hospitals to incorporate their pension data into the desk 
review process because the Internal Revenue Service (IRS) Form 5500 
(used as the basis for reporting pension contributions for defined 
benefit plans) is due 7 months after the end of the plan year (July 
31), with possible extensions through mid-September. In response to 
that comment, in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49989), we 
provided for a general deadline of early September to submit revisions 
to the wage index data posted in the May 2015 preliminary PUF, but 
provided a limited exception for submission of pension data for certain 
hospitals. Specifically, starting with the FY 2017 wage index, we will 
allow an extension for a hospital with a fiscal year begin date on or 
after August 15 of a year to submit its initial pension data by mid-
October 2015, which would revise the preliminary PUF. We stated that we 
believed the majority of hospitals, which do have fiscal year begin 
dates prior to August 15 of a year, would be able to submit their 
pension data, along with the remainder of their wage index 
documentation, to their MACs by the beginning of September of each 
year, in time for the beginning of the annual wage index desk review 
process. We also stated that, in future rulemaking, we may consider 
revisions to the 3-year average pension policy that would allow all 
hospitals to submit their pension data at the same time. We refer 
readers to the FY 2015 IPPS/LTCH PPS final rule for a complete 
discussion of the changes to the FY 2017 wage index timeline (79 FR 
49987 through 49990).
    We have now reconsidered the changes made to the FY 2017 wage index 
timeline in light of our experience to date with the administrative 
aspects of the 3-year average pension policy as explained above and in 
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51586 through 51590). Based 
on our findings, we believe that a revision of the 3-year average 
pension policy is warranted, beginning with the FY 2017 wage index.
    Specifically, in this FY 2016 proposed rule, instead of the 3-year 
average being centered on the base cost reporting period for the wage 
index, we are proposing that, for the FY 2017 wage index and all 
subsequent fiscal year wage indexes, the 3-year average would be based 
on pension contributions made during the base cost reporting period 
plus the prior 2 cost reporting years. For example, the FY 2017 wage 
index will be based on Medicare cost reporting

[[Page 24476]]

periods beginning during Federal FY 2013. Therefore, the FY 2017 wage 
index would reflect the average pension contributions made in 
hospitals' cost reporting periods beginning during Federal FYs 2011, 
2012, and 2013 (rather than Federal FYs 2012, 2013, and 2014 under the 
current FY 2015 policy). Our proposed change in the 3-year averaging 
period would produce a 1-year lag in reporting pension costs relative 
to reporting all other costs included in the wage index and, for most 
hospitals, would result in the same 3-year average pension costs for 
both the FY 2016 and FY 2017 wage index. That is, for FY 2016, the 3-
year average consists of Federal FYs 2011, 2012, and 2013, and under 
our proposal, the 3-year average for FY 2017 also would consist of 
Federal FYs 2011, 2012, and 2013. Under our proposal, the 3-year 
average for FY 2018 would consist of Federal FYs 2012, 2013, and 2014.
    For FY 2017 only, we are proposing that all hospitals submit 
requests to revise their previously submitted pension data by early 
October to mid-October (instead of the first week of September, as 
stated in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49989). We had 
anticipated proposing an early September deadline for all hospitals to 
submit revisions on all data in the preliminary PUF, including pension 
data. However, we realized that such a deadline would involve requiring 
hospitals to submit all of the revisions to pension data prior to the 
effective date of this rule. Therefore, we are proposing this deadline 
change of early October to mid-October so that all hospitals would 
submit revisions to their pension data by the same deadline, which 
should simplify the deadline for submitting those data as well as 
provide more time to most hospitals to submit these data. Because the 
pension data for FY 2017 would be the same pension data already used in 
FY 2016 (as mentioned above), we would expect minimal revisions to the 
pension data for FY 2017. Because we are proposing an extension until 
early to mid-October for all hospitals to revise their pension data for 
FY 2017, we are proposing to eliminate the limited exception and 
extension for hospitals with a fiscal year begin date of on or after 
August 15, as set forth in the FY 2015 IPPS/LTCH PPS final rule (79 FR 
49989). The exception is no longer necessary, given the proposed use of 
data from older cost reports for the 3-year averaging of pension costs 
and the proposed extension of time for submission of revisions of 
pension data for all hospitals for FY 2017. For FY 2018 and subsequent 
fiscal years, we are proposing to require that all hospitals request 
revisions to the preliminary PUF for all wage index issues, including 
submission and/or revisions of pension data, by the first week of 
September. The September deadline for FY 2018 and subsequent fiscal 
years is consistent with the deadline established in the FY 2015 IPPS/
LTCH PPS final rule (7 FR 49989) for the FY 2017 wage index data. 
Specifically, in that final rule, in response to commenters, we 
established the early September deadline as a feasible deadline for 
hospitals to request revisions to their preliminary wage and 
occupational mix data. In addition, we also stated that a deadline in 
early September would be manageable for hospitals, while also providing 
the MACs with the most amount of time possible to complete their desk 
reviews.
    This proposal also allows for a single deadline for all hospitals 
to submit revisions to their wage data, including their pension costs 
(as stated above). A single deadline is preferable because it would 
result in less confusion and would be easier to administer for all 
hospitals. In addition, the limited exception for hospitals with a 
fiscal year begin date of on or after August 15 would have provided 
administrative relief only to a minority of hospitals. Furthermore, in 
many cases, hospitals that participate in a systemwide pension plan or 
State-run retirement system have been unable to obtain timely 
documentation to support their allocated share of total plan 
contributions. We believe that a shift in the 3-year average to the 
base cost reporting period plus the prior 2 cost reporting years would 
provide all hospitals sufficient time to collect and submit their 
pension data by the proposed September deadline, and allow MACs to 
complete their desk reviews on schedule, thereby improving the accuracy 
of the February PUF.
    For the reasons outlined above, we are proposing to revise the 
current policy used to compute the 3-year average for pension costs for 
the wage index, such that, beginning with the FY 2017 wage index, the 
3-year average would be based on pension contributions made during the 
base cost reporting period plus the prior 2 cost reporting years.
    The chart below includes the FY 2017 wage index timetable published 
in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49989), except for the 
mid-October deadline for submitting pension data to the MACs for 
hospitals with fiscal year begin dates on or after August 15, which we 
are proposing to eliminate in this proposed rule. It also includes our 
proposal for FY 2017 for all hospitals to request revisions to their 
pension data by mid-October 2015 (rather than early October as 
published in the FY 2015 IPPS/LTCH PPS final rule (79 FR 49989)).

     FY 2017 Wage Index Timetable With Proposed Deadline for Pension
                                Revisions
------------------------------------------------------------------------
                   Actions                             Deadlines
------------------------------------------------------------------------
Posting of Preliminary PUF on CMS Web site...  Mid-May 2015.
Deadline for Hospitals to Request Revisions    First week of September
 to Preliminary PUF.                            2015.
Deadline for Hospitals to Request Revisions    Early October 2015 to
 to Pension Data.                               Mid[dash]October 2015.
Deadline for MACs to Complete Desk Reviews...  Mid-November 2015.
Posting of January PUF on CMS Web site         Late January 2016.
 (formerly ``February'' PUF).
Deadline Following Posting of January PUF for  Mid-February 2016.
 Hospitals to Request Revisions.
Completion of Appeals by MACs and              Mid to Late March 2016.
 Transmission of Final Wage Data to CMS.
Deadline for Hospitals to Appeal in April....  Early April 2016.
Posting of Final Rule PUF....................  Late April 2016.
Deadline for Hospitals to Appeal in May......  Late May 2016.
Expected Issuance of IPPS Final Rule.........  August 1, 2016.
------------------------------------------------------------------------

    For FY 2018 and subsequent fiscal years, we are proposing the same 
timetable as in FY 2017, except there would no longer be a separate 
deadline in October for submitting and/or revising pension data. 
Rather, all requests to submit and/or revise pension data (as well as 
any other requests for revisions to the preliminary PUF) for FY

[[Page 24477]]

2018 and subsequent fiscal years would be required to be submitted by 
hospitals to MACs in the first week of September each year.

O. Clarification of Allocation of Pension Costs for the Wage Index

    As discussed in section III.N. of the preamble of this proposed 
rule, the pension cost to be included in the Medicare wage index equals 
a hospital's average cash contributions deposited to its defined 
benefit pension plan over a 3-year period. Since implementing this 
policy, we have become aware of some confusion with respect to how 
hospitals are to compute the 3-year average when allocating their 
pension costs on the Medicare cost report if a hospital participates in 
a pension plan or retirement system that also covers other entities. In 
this FY 2016 IPPS/LTCH PPS proposed rule, we are clarifying that if a 
hospital participates in a pension plan or retirement system that also 
covers other entities the hospital must report its respective 3-year 
average pension cost (or prefunding balance) reflecting only the 
hospital's allocated share of total plan contributions, and not 
including any share of pension costs of other entities. For each 
hospital, this is accomplished by first determining the hospital's 
allocated portion of pension contributions for each year of the 3-year 
average, and then computing the 3-year average for that hospital based 
only on that hospital's respective allocated pension contributions. 
This is consistent with the regulations at 42 CFR 413.24(a), which 
state, in pertinent part, that providers must provide adequate cost 
data based on their financial and statistical records. Therefore, a 
provider may not claim as an allowable cost the costs of services 
associated with another entity. It is not appropriate to compute the 3-
year average (or prefunding balance) based on the total contributions 
made to the plan by all participating entities and then determine a 
hospital's allocated portion of the 3-year average cost (or prefunding 
balance) because there are instances in which the 3-year average could 
be skewed because a hospital may be including pension costs from 
another entity in its 3-year average. Specifically, if the allocated 
percentage of total plan contributions for one or more of the 
participating entities changes during the 3-year average, the average 
will be skewed. The allocated percentage to each entity can change due 
to mergers, changes in plan coverage, or other factors. We also note 
that the allocation of contributions between the various entities 
participating in a pension plan or pension system should agree with the 
methodology used for plan reporting purposes and/or financial statement 
purposes, and the methodology used should be applied consistently over 
time. Furthermore, if wage index reporting is required for two or more 
hospitals covered under the same pension plan or retirement system, 
those hospitals should ensure that the allocation of plan contributions 
for each reporting period is determined on a consistent basis to avoid 
duplicate reporting of costs.

IV. Other Decisions and Proposed Changes to the IPPS for Operating 
Costs and Indirect Medical Education (IME) Costs

A. Proposed Changes in the Inpatient Hospital Update for FY 2016 (Sec.  
412.64(d))

1. Proposed FY 2016 Inpatient Hospital Update
    In accordance with section 1886(b)(3)(B)(i) of the Act, each year 
we update the national standardized amount for inpatient operating 
costs by a factor called the ``applicable percentage increase.'' For FY 
2016, we are setting the applicable percentage increase by applying the 
adjustments listed below in the same sequence as we did for FY 2015. 
Specifically, consistent with section 1886(b)(3)(B) of the Act, as 
amended by sections 3401(a) and 10319(a) of the Affordable Care Act, we 
are setting the applicable percentage increase by applying the 
following adjustments in the following sequence: The applicable 
percentage increase under the IPPS is equal to the rate-of-increase in 
the hospital market basket for IPPS hospitals in all areas, subject to 
(1) a reduction of one-quarter of the applicable percentage increase 
(prior to the application of other statutory adjustments; also referred 
to as the market basket update or rate-of-increase (with no 
adjustments)) for hospitals that fail to submit quality information 
under rules established by the Secretary in accordance with section 
1886(b)(3)(B)(viii) of the Act; (2) a 66\2/3\ percent reduction to 
three-quarters of the applicable percentage increase (prior to the 
application of other statutory adjustments; also referred to as the 
market basket update or rate-of-increase (with no adjustments)) for 
hospitals not considered to be meaningful EHR users in accordance with 
section 1886(b)(3)(B)(ix) of the Act; (3) an adjustment based on 
changes in economy-wide productivity (the multifactor productivity 
(MFP) adjustment); and (4) an additional reduction of 0.2 percentage 
point as required by section 1886(b)(3)(B)(xii) of the Act. Sections 
1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as added by section 
3401(a) of the Affordable Care Act, state that application of the MFP 
adjustment and the additional FY 2016 adjustment of 0.2 percentage 
point may result in the applicable percentage increase being less than 
zero.
    We note that, in compliance with section 404 of the MMA, in the FY 
2014 IPPS/LTCH PPS final rule, we replaced the FY 2006-based IPPS 
operating and capital market baskets with the revised and rebased FY 
2010-based IPPS operating and capital market baskets for FY 2014. In 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 49993 through 49996), we 
continued to use the FY 2010-based IPPS operating and capital market 
baskets for FY 2015 and the labor-related share of 69.6 percent, which 
is based on the FY 2010-based IPPS market basket. For FY 2016, we are 
proposing to continue using the FY 2010-based IPPS operating and 
capital market baskets and the labor-related share of 69.6 percent, 
which is based on the FY 2010-based IPPS market basket.
    Based on the most recent data available for this FY 2016 proposed 
rule, in accordance with section 1886(b)(3)(B) of the Act, we are 
proposing to base the proposed FY 2016 market basket update used to 
determine the applicable percentage increase for the IPPS on IHS Global 
Insight, Inc.'s (IGI's) first quarter 2015 forecast of the FY 2010-
based IPPS market basket rate-of-increase with historical data through 
fourth quarter 2014, which is estimated to be 2.7 percent. We are 
proposing that if more recent data become subsequently available (for 
example, a more recent estimate of the market basket and the MFP 
adjustment), we would use such data, if appropriate, to determine the 
FY 2016 market basket update and the MFP adjustment in the final rule.
    For FY 2016, depending on whether a hospital submits quality data 
under the rules established in accordance with section 
1886(b)(3)(B)(viii) of the Act (hereafter referred to as a hospital 
that submits quality data) and is a meaningful EHR user under section 
1886(b)(3)(B)(ix) of the Act (hereafter referred to as a hospital that 
is a meaningful EHR user), there are four possible applicable 
percentage increases that can be applied to the standardized amount (as 
displayed in the table below).
    In the FY 2012 IPPS/LTCH PPS final rule (76 FR 51689 through 
51692), we finalized our methodology for calculating and applying the 
MFP adjustment. As we explained in that rule, section 
1886(b)(3)(B)(xi)(II) of the

[[Page 24478]]

Act, as added by section 3401(a) of the Affordable Care Act, defines 
this productivity adjustment as equal to the 10-year moving average of 
changes in annual economy-wide, private nonfarm business MFP (as 
projected by the Secretary for the 10-year period ending with the 
applicable fiscal year, calendar year, cost reporting period, or other 
annual period). The Bureau of Labor Statistics (BLS) publishes the 
official measure of private nonfarm business MFP. We refer readers to 
the BLS Web site at http://www.bls.gov/mfp for the BLS historical 
published MFP data.
    MFP is derived by subtracting the contribution of labor and capital 
input growth from output growth. The projections of the components of 
MFP are currently produced by IGI, a nationally recognized economic 
forecasting firm with which CMS contracts to forecast the components of 
the market baskets and MFP. As described in the FY 2012 IPPS/LTCH PPS 
final rule, in order to generate a forecast of MFP, IGI replicated the 
MFP measure calculated by the BLS using a series of proxy variables 
derived from IGI's U.S. macroeconomic models. In the FY 2012 IPPS/LTCH 
PPS final rule, we identified each of the major MFP component series 
employed by the BLS to measure MFP as well as provided the 
corresponding concepts determined to be the best available proxies for 
the BLS series.
    Beginning with the FY 2016 rulemaking cycle, the MFP adjustment is 
calculated using a revised series developed by IGI to proxy the 
aggregate capital inputs. Specifically, IGI has replaced the Real 
Effective Capital Stock used for Full Employment GDP with a forecast of 
BLS aggregate capital inputs recently developed by IGI using a 
regression model. This series provides a better fit to the BLS capital 
inputs, as measured by the differences between the actual BLS capital 
input growth rates and the estimated model growth rates over the 
historical time period. Therefore, we are using IGI's most recent 
forecast of the BLS capital inputs series in the MFP calculations 
beginning with the FY 2016 rulemaking cycle. A complete description of 
the MFP projection methodology is available on our Web site at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketResearch.html. Although 
we discuss the IGI changes to the MFP proxy series in this proposed 
rule, in the future, when IGI makes changes to the MFP methodology, we 
will announce them on our Web site rather than in the annual 
rulemaking.
    For FY 2016, we are proposing an MFP adjustment of 0.6 percentage 
point. Similar to the market basket update, for this proposed rule, we 
are using the most recent data available to compute the MFP adjustment. 
As noted above, we are proposing that if more recent data become 
subsequently available, we would use such data, if appropriate, to 
determine the FY 2016 market basket update and MFP adjustment in the FY 
2016 IPPS/LTCH PPS final rule.
    Based on the most recent data available for this proposed rule as 
described above, we have determined four proposed applicable percentage 
increases to the standardized amount for FY 2016, as specified in the 
table below:

                          Proposed FY 2016 Applicable Percentage Increases for the IPPS
----------------------------------------------------------------------------------------------------------------
                                                        Hospital        Hospital     Hospital did   Hospital did
                                                        submitted      submitted      NOT submit     NOT submit
                                                      quality data    quality data   quality data   quality data
                      FY 2016                           and is a      and is NOT a     and is a     and is NOT a
                                                     meaningful EHR    meaningful     meaningful     meaningful
                                                          user          EHR user       EHR user       EHR user
----------------------------------------------------------------------------------------------------------------
Proposed Market Basket Rate[dash]of[dash]Increase..             2.7           2.7           2.7            2.7
Proposed Adjustment for Failure to Submit Quality               0.0           0.0          -0.675         -0.675
 Data under Section 1886(b)(3)(B)(viii) of the Act.
Proposed Adjustment for Failure to be a Meaningful              0.0          -1.35          0.0           -1.35
 EHR User under Section 1886(b)(3)(B)(ix) of the
 Act...............................................
Proposed MFP Adjustment under Section                          -0.6          -0.6          -0.6           -0.6
 1886(b)(3)(B)(xi) of the Act......................
Statutory Adjustment under Section                             -0.2          -0.2          -0.2           -0.2
 1886(b)(3)(B)(xii) of the Act.....................
Proposed Applicable Percentage Increase Applied to              1.9           0.55          1.225         -0.125
 Standardized Amount...............................
----------------------------------------------------------------------------------------------------------------

    We are proposing to revise the existing regulations at 42 CFR 
412.64(d) to reflect the current law for the FY 2016 update. 
Specifically, in accordance with section 1886(b)(3)(B) of the Act, we 
are proposing to modify paragraph (vi) of Sec.  412.64(d)(1) to include 
the applicable percentage increase to the FY 2016 operating 
standardized amount.
    Section 1886(b)(3)(B)(iv) of the Act provides that the applicable 
percentage increase to the hospital-specific rates for SCHs equals the 
applicable percentage increase set forth in section 1886(b)(3)(B)(i) of 
the Act (that is, the same update factor as for all other hospitals 
subject to the IPPS). Therefore, the update to the hospital-specific 
rates for SCHs also is subject to section 1886(b)(3)(B)(i) of the Act, 
as amended by sections 3401(a) and 10319(a) of the Affordable Care Act. 
Accordingly, in this FY 2016 IPPS/LTCH PPS proposed rule, for FY 2016, 
we are proposing the following updates to the hospital-specific rates 
applicable to SCHs: A proposed update of 1.9 percent for a hospital 
that submits quality data and is a meaningful EHR user; a proposed 
update of 1.225 percent for a hospital that fails to submit quality 
data and is a meaningful EHR user; a proposed update of 0.55 percent 
for a hospital that submits quality data and is not a meaningful EHR 
user; a proposed update of -0.125 percent for a hospital that fails to 
submit quality data and is not a meaningful EHR user. As mentioned 
above, for this FY 2016 proposed rule, we used IGI's first quarter 2015 
forecast of the FY 2010-based IPPS market basket update with historical 
data through fourth quarter 2014. Similarly, we used IGI's first 
quarter 2015 forecast of the MFP adjustment. We are proposing that if 
more recent data become subsequently available (for example, a more 
recent estimate of the market basket and the MFP adjustment), we would 
use such data, if appropriate, to determine the update for SCHs in the 
final rule.
    We note that the MDH program expired for discharges beginning on 
April 1, 2015 under current law.
2. Proposed FY 2016 Puerto Rico Hospital Update
    Puerto Rico hospitals are paid a blended rate for their inpatient 
operating costs based on 75 percent of the national standardized amount 
and 25 percent of the Puerto Rico-specific

[[Page 24479]]

standardized amount. Section 1886(d)(9)(C)(i) of the Act is the basis 
for determining the applicable percentage increase applied to the 
Puerto Rico-specific standardized amount. Section 401(c) of Public Law 
108-173 amended section 1886(d)(9)(C)(i) of the Act, which states that, 
for discharges occurring in a fiscal year (beginning with FY 2004), the 
Secretary shall compute an average standardized amount for hospitals 
located in any area of Puerto Rico that is equal to the average 
standardized amount computed under subclause (I) for fiscal year 2003 
for hospitals in a large urban area (or, beginning with FY 2005, for 
all hospitals in the previous fiscal year) increased by the applicable 
percentage increase under subsection (b)(3)(B) for the fiscal year 
involved. Therefore, the update to the Puerto Rico-specific operating 
standardized amount equals the applicable percentage increase set forth 
in section 1886(b)(3)(B)(i) of the Act, as amended by sections 3401(a) 
and 10319(a) of the Affordable Care Act (that is, the same update 
factor as for all other hospitals subject to the IPPS). Accordingly, we 
are proposing an applicable percentage increase to the Puerto Rico-
specific operating standardized amount of 1.9 percent for FY 2016. For 
this proposed rule, we used the first quarter 2015 forecast of the FY 
2010-based IPPS market basket update with historical data through 
fourth quarter 2014. We are proposing that if more recent data become 
subsequently available, we would use such data, if appropriate, to 
determine the final FY 2016 applicable percentage increase for the 
final rule. We note that the provisions of section 1886(b)(3)(B)(viii) 
of the Act, which specify the adjustments to the applicable percentage 
increase for ``subsection (d)'' hospitals that do not submit quality 
data under the rules established by the Secretary, and the provisions 
of section 1886(b)(3)(B)(ix) of the Act, which specify the adjustments 
to the applicable percentage increase for ``subsection (d)'' hospitals 
that are not meaningful EHR users, are not applicable to hospitals 
located in Puerto Rico.
    Similarly, for this FY 2016 proposed rule, we used IGI's first 
quarter 2015 forecast of the MFP adjustment. We are proposing that if 
more recent data become subsequently available, we would use such data, 
if appropriate, to determine the MFP adjustment for the final rule.

B. Rural Referral Centers (RRCs): Proposed Annual Updates to Case-Mix 
Index and Discharge Criteria (Sec.  412.96)

    Under the authority of section 1886(d)(5)(C)(i) of the Act, the 
regulations at Sec.  412.96 set forth the criteria that a hospital must 
meet in order to qualify under the IPPS as a rural referral center 
(RRC). RRCs receive some special treatment under both the DSH payment 
adjustment and the criteria for geographic reclassification.
    Section 402 of Public Law 108-173 raised the DSH payment adjustment 
for RRCs such that they are not subject to the 12-percent cap on DSH 
payments that is applicable to other rural hospitals. RRCs also are not 
subject to the proximity criteria when applying for geographic 
reclassification. In addition, they do not have to meet the requirement 
that a hospital's average hourly wage must exceed, by a certain 
percentage, the average hourly wage of the labor market area in which 
the hospital is located.
    Section 4202(b) of Public Law 105-33 states, in part, that any 
hospital classified as an RRC by the Secretary for FY 1991 shall be 
classified as such an RRC for FY 1998 and each subsequent fiscal year. 
In the August 29, 1997 IPPS final rule with comment period (62 FR 
45999), CMS reinstated RRC status for all hospitals that lost that 
status due to triennial review or MGCRB reclassification. However, CMS 
did not reinstate the status of hospitals that lost RRC status because 
they were now urban for all purposes because of the OMB designation of 
their geographic area as urban. Subsequently, in the August 1, 2000 
IPPS final rule (65 FR 47089), we indicated that we were revisiting 
that decision. Specifically, we stated that we would permit hospitals 
that previously qualified as an RRC and lost their status due to OMB 
redesignation of the county in which they are located from rural to 
urban, to be reinstated as an RRC. Otherwise, a hospital seeking RRC 
status must satisfy all of the other applicable criteria. We use the 
definitions of ``urban'' and ``rural'' specified in Subpart D of 42 CFR 
Part 412. One of the criteria under which a hospital may qualify as an 
RRC is to have 275 or more beds available for use (Sec.  
412.96(b)(1)(ii)). A rural hospital that does not meet the bed size 
requirement can qualify as an RRC if the hospital meets two mandatory 
prerequisites (a minimum case-mix index (CMI) and a minimum number of 
discharges), and at least one of three optional criteria (relating to 
specialty composition of medical staff, source of inpatients, or 
referral volume). (We refer readers to Sec.  412.96(c)(1) through 
(c)(5) and the September 30, 1988 Federal Register (53 FR 38513) for 
additional discussion.) With respect to the two mandatory 
prerequisites, a hospital may be classified as an RRC if--
     The hospital's CMI is at least equal to the lower of the 
median CMI for urban hospitals in its census region, excluding 
hospitals with approved teaching programs, or the median CMI for all 
urban hospitals nationally; and
     The hospital's number of discharges is at least 5,000 per 
year, or, if fewer, the median number of discharges for urban hospitals 
in the census region in which the hospital is located. The number of 
discharges criterion for an osteopathic hospital is at least 3,000 
discharges per year, as specified in section 1886(d)(5)(C)(i) of the 
Act.
1. Case-Mix Index (CMI)
    Section 412.96(c)(1) provides that CMS establish updated national 
and regional CMI values in each year's annual notice of prospective 
payment rates for purposes of determining RRC status. The methodology 
we used to determine the national and regional CMI values is set forth 
in the regulations at Sec.  412.96(c)(1)(ii). The proposed national 
median CMI value for FY 2016 is based on the CMI values of all urban 
hospitals nationwide, and the proposed regional median CMI values for 
FY 2016 are based on the CMI values of all urban hospitals within each 
census region, excluding those hospitals with approved teaching 
programs (that is, those hospitals that train residents in an approved 
GME program as provided in Sec.  413.75). These proposed values are 
based on discharges occurring during FY 2014 (October 1, 2013 through 
September 30, 2014), and include bills posted to CMS' records through 
December 2014.
    We are proposing that, in addition to meeting other criteria, if 
rural hospitals with fewer than 275 beds are to qualify for initial RRC 
status for cost reporting periods beginning on or after October 1, 
2015, they must have a CMI value for FY 2014 that is at least--
     1.6075; or
     The median CMI value (not transfer-adjusted) for urban 
hospitals (excluding hospitals with approved teaching programs as 
identified in Sec.  413.75) calculated by CMS for the census region in 
which the hospital is located. The proposed median CMI values by region 
are set forth in the following table.

[[Page 24480]]



------------------------------------------------------------------------
                                                          Proposed case-
                         Region                              mix index
                                                               value
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT).................          1.3737
2. Middle Atlantic (PA, NJ, NY).........................          1.4532
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)..          1.5042
4. East North Central (IL, IN, MI, OH, WI)..............          1.5109
5. East South Central (AL, KY, MS, TN)..................          1.4172
6. West North Central (IA, KS, MN, MO, NE, ND, SD)......          1.5890
7. West South Central (AR, LA, OK, TX)..................          1.6294
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............          1.7048
9. Pacific (AK, CA, HI, OR, WA).........................          1.6157
------------------------------------------------------------------------

    We intend to update the preceding CMI values in the FY 2016 final 
rule to reflect the updated FY 2014 MedPAR file, which would contain 
data from additional bills received through March 2015.
    A hospital seeking to qualify as an RRC should obtain its hospital-
specific CMI value (not transfer-adjusted) from its MAC. Data are 
available on the Provider Statistical and Reimbursement (PS&R) System. 
In keeping with our policy on discharges, the CMI values are computed 
based on all Medicare patient discharges subject to the IPPS MS-DRG-
based payment.
2. Discharges
    Section 412.96(c)(2)(i) provides that CMS set forth the national 
and regional numbers of discharges criteria in each year's annual 
notice of prospective payment rates for purposes of determining RRC 
status. As specified in section 1886(d)(5)(C)(ii) of the Act, the 
national standard is set at 5,000 discharges. For FY 2016, we are 
proposing to update the regional standards based on discharges for 
urban hospitals' cost reporting periods that began during FY 2013 (that 
is October 1, 2012 through September 30, 2013), which are the latest 
cost report data available at the time this proposed rule was 
developed.
    We are proposing that, in addition to meeting other criteria, a 
hospital, if it is to qualify for initial RRC status for cost reporting 
periods beginning on or after October 1, 2015, must have, as the number 
of discharges for its cost reporting period that began during FY 2013, 
at least--
     5,000 (3,000 for an osteopathic hospital); or
     The median number of discharges for urban hospitals in the 
census region in which the hospital is located, as indicated in the 
following table.

------------------------------------------------------------------------
                                                             Number of
                         Region                             discharges
------------------------------------------------------------------------
1. New England (CT, ME, MA, NH, RI, VT).................           7,370
2. Middle Atlantic (PA, NJ, NY).........................          10,398
3. South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV)..          10,220
4. East North Central (IL, IN, MI, OH, WI)..............           7,951
5. East South Central (AL, KY, MS, TN)..................           7,439
6. West North Central (IA, KS, MN, MO, NE, ND, SD)......           7,858
7. West South Central (AR, LA, OK, TX)..................           5,355
8. Mountain (AZ, CO, ID, MT, NV, NM, UT, WY)............           8,480
9. Pacific (AK, CA, HI, OR, WA).........................           8,588
------------------------------------------------------------------------

    We intend to update these numbers in the FY 2016 final rule based 
on the latest available cost report data.
    We note that the median number of discharges for hospitals in each 
census region is greater than the national standard of 5,000 
discharges. Therefore, under this proposed rule, 5,000 discharges is 
the minimum criterion for all hospitals, except for osteopathic 
hospitals for which the minimum criterion is 3,000 discharges.

C. Indirect Medical Education (IME) Payment Adjustment Factor for FY 
2016 (Sec.  412.105)

    Under the IPPS, an additional payment amount is made to hospitals 
with residents in an approved graduate medical education (GME) program 
in order to reflect the higher indirect patient care costs of teaching 
hospitals relative to nonteaching hospitals. The payment amount is 
determined by use of a statutorily specified adjustment factor. The 
regulations regarding the calculation of this additional payment, known 
as the IME adjustment, are located at Sec.  412.105. We refer readers 
to the FY 2012 IPPS/LTCH PPS final rule (76 FR 51680) for a full 
discussion of the IME adjustment and IME adjustment factor. Section 
1886(d)(5)(B) of the Act states that, for discharges occurring during 
FY 2008 and fiscal years thereafter, the IME formula multiplier is 
1.35. Accordingly, for discharges occurring during FY 2016, the formula 
multiplier is 1.35. We estimate that application of this formula 
multiplier for the FY 2016 IME adjustment will result in an increase in 
IPPS payment of 5.5 percent for every approximately 10 percent increase 
in the hospital's resident to bed ratio.

D. Proposed FY 2016 Payment Adjustment for Medicare Disproportionate 
Share Hospitals (DSHs) (Sec.  412.106)

1. Background
    Section 1886(d)(5)(F) of the Act provides for additional Medicare 
payments to subsection (d) hospitals that serve a significantly 
disproportionate number of low-income patients. The Act specifies two 
methods by which a hospital may qualify for the Medicare 
disproportionate share hospital (DSH) adjustment. Under the first 
method, hospitals that are located in an urban area and have 100 or 
more beds may receive a Medicare DSH payment adjustment if the hospital 
can demonstrate that, during its cost reporting period, more than 30 
percent of its net inpatient care revenues are derived from State and 
local government payments for care furnished to needy patients with low 
incomes. This method is commonly referred to as the ``Pickle method.'' 
The second method for qualifying for the DSH payment adjustment, which 
is the most common, is based on a complex statutory formula under which 
the DSH payment adjustment is based on the hospital's geographic 
designation, the number of beds in the hospital, and the level of the 
hospital's disproportionate patient percentage (DPP). A hospital's DPP 
is the sum of two fractions: The ``Medicare fraction'' and the 
``Medicaid fraction.'' The Medicare fraction (also known as the ``SSI 
fraction'' or ``SSI ratio'') is computed by dividing the number of the 
hospital's inpatient days that are furnished to patients who were 
entitled to both Medicare Part A and Supplemental Security Income (SSI) 
benefits by the hospital's total number of patient days furnished to 
patients entitled to benefits under Medicare Part A. The Medicaid 
fraction is computed by dividing the hospital's number of inpatient 
days furnished to patients who, for such days, were eligible for 
Medicaid, but were not entitled to benefits under Medicare Part A, by 
the hospital's total number of inpatient days in the same period.
    Because the DSH payment adjustment is part of the IPPS, the DSH 
statutory references (under section 1886(d)(5)(F) of the Act) to 
``days'' apply only to hospital acute care inpatient days. Regulations 
located at Sec.  412.106 govern the Medicare DSH payment adjustment and 
specify how the DPP is calculated as well as how beds and patient days 
are counted in determining the Medicare DSH payment adjustment. Under 
Sec.  412.106(a)(1)(i), the number of beds for the Medicare DSH payment 
adjustment

[[Page 24481]]

is determined in accordance with bed counting rules for the IME 
adjustment under Sec.  412.105(b).
2. Impact on Medicare DSH Payment Adjustment of the Continued 
Implementation of New OMB Labor Market Area Delineations
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951), we 
implemented the revised OMB labor market area delineations (which are 
based on 2010 Decennial Census data) for the FY 2015 wage index. (In 
this proposed rule, we refer to these revised OMB labor market area 
delineations as the ``new OMB delineations.'') We stated that this 
implementation would have an impact on the calculation of Medicare DSH 
payments to certain hospitals. Hospitals that are designated as rural 
with less than 500 beds and that are not rural referral centers (RRCs) 
are subject to a maximum DSH payment adjustment of 12 percent. 
Accordingly, hospitals with less than 500 beds that are currently in 
urban counties that became rural when we adopted the new OMB 
delineations, and that did not become RRCs, are subject to a maximum 
DSH payment adjustment of 12 percent. (We note that urban hospitals are 
only subject to a maximum DSH payment adjustment of 12 percent if they 
have less than 100 beds.)
    Under the regulation at 42 CFR 412.102, a hospital located in an 
area that is reclassified from urban to rural, as defined in the 
regulations, may receive an adjustment to its rural Federal payment 
amount for operating costs for 2 successive fiscal years. Specifically, 
the regulations state that, in the first year after a hospital loses 
urban status, the hospital will receive an additional payment that 
equals two-thirds of the difference between the DSH payments as 
applicable to the hospital before its redesignation from urban to rural 
and the DSH payments applicable to the hospital subsequent to its 
redesignation from urban to rural. In the second year after a hospital 
loses urban status, the hospital will receive an additional payment 
that equals one-third of the difference between the DSH payments 
applicable to the hospital before its redesignation from urban to rural 
and the DSH payments otherwise applicable to the hospital subsequent to 
its redesignation from urban to rural.
    We note that we no longer make a distinction between the urban 
standardized amount and the rural standardized amount. Rather, 
hospitals receive the same standardized amount, regardless of their 
geographic designation. Accordingly, in the FY 2015 IPPS/LTCH PPS final 
rule, we revised the regulation at Sec.  412.102 to remove references 
to the urban and rural standardized amounts.
    The provisions of Sec.  412.102 continue to apply with respect to 
the calculation of the DSH payments to hospitals that are currently 
located in urban counties that became rural under our adoption of the 
new OMB delineations. Specifically, the regulations state that, in the 
first year after a hospital loses urban status, the hospital will 
receive an additional payment that equals two-thirds of the difference 
between the DSH payments as applicable to the hospital before its 
redesignation from urban to rural and the DSH payments otherwise 
applicable to the hospital subsequent to its redesignation from urban 
to rural. In the second year after a hospital loses urban status, the 
hospital will receive an additional payment that equals one-third of 
the difference between the DSH payments applicable to the hospital 
before its redesignation from urban to rural and the DSH payments 
otherwise applicable to the hospital subsequent to its redesignation 
from urban to rural.
    For the purposes of ratesetting, calculating budget neutrality, and 
modeling payment impacts for this FY 2016 proposed rule, any hospital 
that was previously urban but changed to rural status in FY 2015 as a 
result of the adoption of the new OMB labor market area delineations 
will have its DSH payments modeled such that the payment equals the 
amount of the rural DSH payments plus one-third of the difference 
between the urban DSH payments and the rural DSH payments.
3. Payment Adjustment Methodology for Medicare Disproportionate Share 
Hospitals (DSHs) Under Section 3133 of the Affordable Care Act
a. General Discussion
    Section 3133 of the Patient Protection and Affordable Care Act, as 
amended by section 10316 of the same act and section 1104 of the Health 
Care and Education Reconciliation Act (Pub. L. 111-152), added a new 
section 1886(r) to the Act that modifies the methodology for computing 
the Medicare DSH payment adjustment beginning in FY 2014. For purposes 
of this proposed rule, we refer to these provisions collectively as 
section 3133 of the Affordable Care Act.
    Medicare DSH payments are calculated under a statutory formula that 
considers the hospital's Medicare utilization attributable to 
beneficiaries who also receive Supplemental Security Income (SSI) 
benefits and the hospital's Medicaid utilization. Beginning with 
discharges in FY 2014, hospitals that qualify for Medicare DSH payments 
under section 1886(d)(5)(F) of the Act receive 25 percent of the amount 
they previously would have received under the statutory formula for 
Medicare DSH payments. This provision applies equally to hospitals that 
qualify for DSH payments under section 1886(d)(5)(F)(i)(I) of the Act 
and those hospitals that qualify under the Pickle method under section 
1886(d)(5)(F)(i)(II) of the Act.
    The remaining amount, equal to an estimate of 75 percent of what 
otherwise would have been paid as Medicare DSH payments, reduced to 
reflect changes in the percentage of individuals under age 65 who are 
uninsured, is available to make additional payments to each hospital 
that qualifies for Medicare DSH payments and that has uncompensated 
care. The payments to each hospital for a fiscal year are based on the 
hospital's amount of uncompensated care for a given time period 
relative to the total amount of uncompensated care for that same time 
period reported by all hospitals that receive Medicare DSH payments for 
that fiscal year.
    As provided by section 3133 of the Affordable Care Act, section 
1886(r) of the Act requires that, for FY 2014 and each subsequent 
fiscal year, a subsection (d) hospital that would otherwise receive a 
disproportionate share hospital payment made under section 
1886(d)(5)(F) of the Act receives two separately calculated payments. 
Specifically, section 1886(r)(1) of the Act provides that the Secretary 
shall pay to such a subsection (d) hospital (including a Pickle 
hospital) 25 percent of the amount the hospital would have received 
under section 1886(d)(5)(F) of the Act for DSH payments, which 
represents the empirically justified amount for such payment, as 
determined by the Medicare Payment Advisory Commission in its March 
2007 Report to the Congress. We refer to this payment as the 
``empirically justified Medicare DSH payment.''
    In addition to this empirically justified Medicare DSH payment, 
section 1886(r)(2) of the Act provides that, for FY 2014 and each 
subsequent fiscal year, the Secretary shall pay to such subsection (d) 
hospital an additional amount equal to the product of three factors. 
The first factor is the difference between the aggregate amount of 
payments that would be made to subsection (d) hospitals under section 
1886(d)(5)(F) of the Act if subsection (r) did not apply and the 
aggregate amount of payments that are made to subsection (d) hospitals 
under section 1886(r)(1) of the Act for each fiscal year. Therefore, 
this factor

[[Page 24482]]

amounts to 75 percent of the payments that would otherwise be made 
under section 1886(d)(5)(F) of the Act.
    The second factor is, for FYs 2014 through 2017, 1 minus the 
percent change in the percent of individuals under the age of 65 who 
are uninsured, determined by comparing the percent of such individuals 
who are uninsured in 2013, the last year before coverage expansion 
under the Affordable Care Act (as calculated by the Secretary based on 
the most recent estimates available from the Director of the 
Congressional Budget Office before a vote in either House on the Health 
Care and Education Reconciliation Act of 2010 that, if determined in 
the affirmative, would clear such Act for enrollment), minus 0.1 
percentage point for FY 2014, and minus 0.2 percentage point for FYs 
2015 through 2017. For FYs 2014 through 2017, the baseline for the 
estimate of the change in uninsurance is fixed by the most recent 
estimate of the Congressional Budget Office before the final vote on 
the Health Care and Education Reconciliation Act of 2010, which is 
contained in a March 20, 2010 letter from the Director of the 
Congressional Budget Office to the Speaker of the House. (The March 20, 
2010 letter is available for viewing on the following Web site: http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/113xx/doc11379/amendreconprop.pdf.).
    For FY 2018 and subsequent years, the second factor is 1 minus the 
percent change in the percent of individuals who are uninsured, as 
determined by comparing the percent of individuals who are uninsured in 
2013 (as estimated by the Secretary, based on data from the Census 
Bureau or other sources the Secretary determines appropriate, and 
certified by the Chief Actuary of CMS, and the percent of individuals 
who are uninsured in the most recent period for which data are 
available (as so estimated and certified), minus 0.2 percentage point 
for FYs 2018 and 2019. Therefore, for FY 2018 and subsequent years, the 
statute provides some greater flexibility in the choice of the data 
sources to be used for the estimate of the change in the percent of 
uninsured individuals.
    The third factor is a percent that, for each subsection (d) 
hospital, represents the quotient of the amount of uncompensated care 
for such hospital for a period selected by the Secretary (as estimated 
by the Secretary, based on appropriate data), including the use of 
alternative data where the Secretary determines that alternative data 
is available which is a better proxy for the costs of subsection (d) 
hospitals for treating the uninsured, and the aggregate amount of 
uncompensated care for all subsection (d) hospitals that receive a 
payment under section 1886(r) of the Act. Therefore, this third factor 
represents a hospital's uncompensated care amount for a given time 
period relative to the uncompensated care amount for that same time 
period for all hospitals that receive Medicare DSH payments in that 
fiscal year, expressed as a percent.
    For each hospital, the product of these three factors represents 
its additional payment for uncompensated care for the applicable fiscal 
year. We refer to the additional payment determined by these factors as 
the ``uncompensated care payment.''
    Section 1886(r) of the Act applies to FY 2014 and each subsequent 
fiscal year. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50620 
through 50647) and the FY 2014 IPPS interim final rule with comment 
period (78 FR 61191 through 61197), we set forth our policies for 
implementing the required changes to the DSH payment methodology made 
by section 3133 of the Affordable Care Act for FY 2014. In those rules, 
we noted that, because section 1886(r) of the Act modifies the payment 
required under section 1886(d)(5)(F) of the Act, it affects only the 
DSH payment under the operating IPPS. It does not revise or replace the 
capital IPPS DSH payment provided under the regulations at 42 CFR part 
412, subpart M, which were established through the exercise of the 
Secretary's discretion in implementing the capital IPPS under section 
1886(g)(1)(A) of the Act.
    Finally, section 1886(r)(3) of the Act provides that there shall be 
no administrative or judicial review under section 1869, section 1878, 
or otherwise of any estimate of the Secretary for purposes of 
determining the factors described in section 1886(r)(2) of the Act or 
of any period selected by the Secretary for the purpose of determining 
those factors. Therefore, there is no administrative or judicial review 
of the estimates developed for purposes of applying the three factors 
used to determine uncompensated care payments, or the periods selected 
in order to develop such estimates.
b. Eligibility for Empirically Justified Medicare DSH Payments and 
Uncompensated Care Payments
    As indicated earlier, the payment methodology under section 3133 of 
the Affordable Care Act applies to ``subsection (d) hospitals'' that 
would otherwise receive a DSH payment made under section 1886(d)(5)(F) 
of the Act. Therefore, hospitals must receive empirically justified 
Medicare DSH payments in a fiscal year in order to receive an 
additional Medicare uncompensated care payment for that year. 
Specifically, section 1886(r)(2) of the Act states that in addition to 
the payment made to a subsection (d) hospital under section 1886(r)(1) 
of the Act, the Secretary shall pay to such subsection (d) hospitals an 
additional amount. Because section 1886(r)(1) of the Act refers to 
empirically justified Medicare DSH payments, the additional payment 
under section 1886(r)(2) of the Act is limited to hospitals that 
receive empirically justified Medicare DSH payments in accordance with 
section 1886(r)(1) of the Act for the applicable fiscal year.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY 
2014 IPPS interim final rule with comment period (78 FR 61193), we 
provided that hospitals that are not eligible to receive empirically 
justified Medicare DSH payments in a fiscal year will not receive 
uncompensated care payments for that year. We also specified that we 
would make a determination concerning eligibility for interim 
uncompensated care payments based on each hospital's estimated DSH 
status for the applicable fiscal year (using the most recent data that 
are available). We indicated that our final determination on the 
hospital's eligibility for uncompensated care payments would be based 
on the hospital's actual DSH status on the cost report for that payment 
year.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50622) and the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50006), we specified our policies 
for several specific classes of hospitals within the scope of section 
1886(r) of the Act. We refer readers to those two final rules for a 
detailed discussion of our policies. In summary, we specified the 
following:
     Subsection (d) Puerto Rico hospitals that are eligible for 
DSH payments also are eligible to receive empirically justified 
Medicare DSH payments and uncompensated care payments under the new 
payment methodology (78 FR 50623 and 79 FR 50006).
     Maryland hospitals are not eligible to receive empirically 
justified Medicare DSH payments and uncompensated care payments under 
the payment methodology of section 1886(r) of the Act because they are 
not paid under the IPPS. As discussed in the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 50007), effective January 1, 2014, the State of 
Maryland elected to no longer have Medicare pay Maryland hospitals in 
accordance with section 1814(b)(3) of the Act and entered into an 
agreement

[[Page 24483]]

with CMS that Maryland hospitals will be paid under the Maryland All-
Payer Model. However, under the Maryland All-Payer Model, Maryland 
hospitals still are not paid under the IPPS. Therefore, they remain 
ineligible to receive empirically justified Medicare DSH payments or 
uncompensated care payments under section 1886(r) of the Act.
     SCHs that are paid under their hospital-specified rate are 
not eligible for Medicare DSH payments. SCHs that are paid under the 
IPPS Federal rate receive interim payments based on what we estimate 
and project their DSH status to be prior to the beginning of the 
Federal fiscal year (based on the best available data at that time) 
subject to settlement through the cost report, and if they receive 
interim empirically justified Medicare DSH payments in a fiscal year, 
they also will receive interim uncompensated care payments for that 
fiscal year on a per discharge basis, subject as well to settlement 
through the cost report. Final eligibility determinations will be made 
at the end of the cost reporting period at settlement, and both interim 
empirically justified Medicare DSH payments and uncompensated care 
payments will be adjusted accordingly (78 FR 50624 and 79 FR 50007).
     MDHs, up until the expiration of the MDH program on March 
31, 2015, were paid under the IPPS Federal rate or, if higher, the IPPS 
Federal rate plus 75 percent of the amount by which the Federal rate is 
exceeded by the updated hospital-specific rate from certain specified 
base years (76 FR 51684). The IPPS Federal rate used in the MDH payment 
methodology is the same IPPS Federal rate that is used in the SCH 
payment methodology. Therefore, MDHs were eligible to receive Medicare 
DSH payments and uncompensated care payments if their disproportionate 
patient percentage was at least 15 percent. We applied the same process 
to determine MDH eligibility for Medicare DSH and uncompensated care 
payments, as we did for all other IPPS hospitals, through March 31, 
2015 (79 FR 50007). Consistent with our policy of including a pro rata 
share of the uncompensated care payment amount for a period as part of 
the Federal rate payment in the comparison of payments under the 
hospital-specific rate and the Federal rate, for MDH payments for the 
first 6 months of FY 2015, we will include a pro rata share of the 
uncompensated care payment amount that reflects the period of time the 
hospital was paid under the MDH program for its discharges occurring on 
or after October 1, 2014, and before April 1, 2015 (79 FR 50008). 
Beginning April 1, 2015, all hospitals that previously qualified for 
MDH status no longer have MDH status under current law. Therefore, 
starting April 1, 2015, we determine eligibility for these hospitals as 
we do for all other IPPS hospitals.
    If the MDH program were to be extended beyond its current 
expiration date of March 31, 2015, similar to how it was extended from 
October 1, 2013, to March 31, 2014, under the Pathway for SGR Reform 
Act (Pub. L. 113-67) and from April 1, 2014, to March 31, 2015, by the 
Protecting Access to Medicare Act of 2014 (Pub. L. 113-93), MDHs would 
continue to be paid based on the IPPS Federal rate or, if higher, the 
IPPS Federal rate plus 75 percent of the amount by which the Federal 
rate is exceeded by the updated hospital-specific rate from certain 
specified base years (76 FR 51684). Because MDHs are paid based on the 
IPPS Federal rate and, therefore, are eligible to receive Medicare DSH 
payments if their disproportionate patient percentage is at least 15 
percent, if the MDH program is extended beyond its current expiration 
date of March 31, 2015, we would continue to make a determination 
concerning eligibility for interim uncompensated care payments based on 
each hospital's estimated DSH status for the applicable fiscal year 
(using the most recent data that are available). Our final 
determination on the hospital's eligibility for uncompensated care 
payments would be based on the hospital's actual DSH status on the cost 
report for that payment year. In addition, as we do for all IPPS 
hospitals, we would calculate a numerator for Factor 3 for all MDHs, 
regardless of whether they are projected to be eligible for Medicare 
DSH payments during the fiscal year, but the denominator for Factor 3 
would be based on the uncompensated care data from the hospitals that 
we have projected to be eligible for Medicare DSH payments during the 
fiscal year.
    These policies for MDHs would only apply in FY 2016 if the MDH 
program is extended, by statute, beyond its current expiration date of 
March 31, 2015.
     IPPS hospitals that have elected to participate in the 
Bundled Payments for Care Improvement initiative continue to be paid 
under the IPPS (77 FR 53342) and, therefore, are eligible to receive 
empirically justified Medicare DSH payments and uncompensated care 
payments (78 FR 50625 and 79 FR 50008).
     Hospitals participating in the Rural Community Hospital 
Demonstration Program under section 410A of the Medicare Modernization 
Act do not receive DSH payments and, therefore, are excluded from 
receiving empirically justified Medicare DSH payments and uncompensated 
care payments under the new DSH payment methodology (78 FR 50625 and 79 
FR 50008). There are 20 hospitals currently participating in the 
demonstration.
c. Empirically Justified Medicare DSH Payments
    As we have discussed earlier, section 1886(r)(1) of the Act 
requires the Secretary to pay 25 percent of the amount of the DSH 
payment that would otherwise be made under section 1886(d)(5)(F) of the 
Act to a subsection (d) hospital. Because section 1886(r)(1) of the Act 
merely requires the program to pay a designated percentage of these 
payments, without revising the criteria governing eligibility for DSH 
payments or the underlying payment methodology, we stated in the FY 
2014 IPPS/LTCH PPS final rule that we did not believe that it was 
necessary to develop any new operational mechanisms for making such 
payments. Therefore, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50626), we implemented this provision simply by revising the claims 
payment methodologies to adjust the interim claim payments to the 
requisite 25 percent of what would have otherwise been paid. We also 
made corresponding changes to the hospital cost report so that these 
empirically justified Medicare DSH payments can be settled at the 
appropriate level at the time of cost report settlement. We provided 
more detailed operational instructions and cost report instructions 
following issuance of the final rule that can be found on the CMS Web 
site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Transmittals/2014-Transmittals-Items/R5P240.html.
d. Uncompensated Care Payments
    As we have discussed earlier, section 1886(r)(2) of the Act 
provides that, for each eligible hospital in FY 2014 and subsequent 
years, the uncompensated care payment is the product of three factors. 
These three factors represent our estimate of 75 percent of the amount 
of Medicare DSH payments that would otherwise have been paid, an 
adjustment to this amount for the percent change in the national rate 
of uninsurance compared to the rate of uninsurance in 2013, and each 
eligible hospital's estimated uncompensated care amount relative to the 
estimated uncompensated care amount for all eligible hospitals. Below 
we discuss the

[[Page 24484]]

data sources and methodologies for computing each of these factors, our 
final policies for FY 2014 and FY 2015, and our proposed policies for 
FY 2016.
(1) Calculation of Proposed Factor 1 for FY 2016
    Section 1886(r)(2)(A) of the Act establishes Factor 1 in the 
calculation of the uncompensated care payment. Section 1886(r)(2)(A) of 
the Act states that it is a factor equal to the difference between (i) 
the aggregate amount of payments that would be made to subsection (d) 
hospitals under section 1886(d)(5)(F) if this section did not apply for 
such fiscal year (as estimated by the Secretary); and (ii) the 
aggregate amount of payments that are made to subsection (d) hospitals 
under section 1886(r)(1) of the Act for such fiscal year (as so 
estimated). Therefore, section 1886(r)(2)(A)(i) of the Act represents 
the estimated Medicare DSH payment that would have been made under 
section 1886(d)(5)(F) of the Act if section 1886(r) of the Act did not 
apply for such fiscal year. Under a prospective payment system, we 
would not know the precise aggregate Medicare DSH payment amount that 
would be paid for a Federal fiscal year until cost report settlement 
for all IPPS hospitals is completed, which occurs several years after 
the end of the Federal fiscal year. Therefore, section 1886(r)(2)(A)(i) 
of the Act provides authority to estimate this amount, by specifying 
that, for each fiscal year to which the provision applies, such amount 
is to be ``estimated by the Secretary.'' Similarly, section 
1886(r)(2)(A)(ii) of the Act represents the estimated empirically 
justified Medicare DSH payments to be made in a fiscal year, as 
prescribed under section 1886(r)(1) of the Act. Again, section 
1886(r)(2)(A)(ii) of the Act provides authority to estimate this 
amount.
    Therefore, Factor 1 is the difference between our estimates of: (1) 
the amount that would have been paid in Medicare DSH payments for the 
fiscal year, in the absence of the new payment provision; and (2) the 
amount of empirically justified Medicare DSH payments that are made for 
the fiscal year, which takes into account the requirement to pay 25 
percent of what would have otherwise been paid under section 
1886(d)(5)(F) of the Act. In other words, this factor represents our 
estimate of 75 percent (100 percent minus 25 percent) of our estimate 
of Medicare DSH payments that would otherwise be made, in the absence 
of section 1886(r) of the Act, for the fiscal year.
    As we did for FY 2015, in order to determine Factor 1 in the 
uncompensated care payment formula for FY 2016, we are proposing to 
continue the policy established in the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50628 through 50630) and in the FY 2014 IPPS interim final rule 
with comment period (78 FR 61194) of determining Factor 1 by developing 
estimates of both the aggregate amount of Medicare DSH payments that 
would be made in the absence of section 1886(r)(1) of the Act and the 
aggregate amount of empirically justified Medicare DSH payments to 
hospitals under 1886(r)(1) of the Act through rulemaking. These 
estimates will not be revised or updated after we know the final 
Medicare DSH payments for FY 2016.
    Therefore, in order to determine the two elements of Factor 1 
(Medicare DSH payments prior to the application of section 1886(r)(1) 
of the Act, and empirically justified Medicare DSH payments after 
application of section 1886(r)(1) of the Act), in FYs 2014 and 2015, we 
used the most recently available projections of Medicare DSH payments 
for the applicable fiscal year, as calculated by CMS' Office of the 
Actuary using the most recently filed Medicare hospital cost report 
with Medicare DSH payment information and the most recent Medicare DSH 
patient percentages and Medicare DSH payment adjustments provided in 
the IPPS Impact File.
    For purposes of calculating Factor 1 and modeling the impact of 
this provision for this FY 2016 IPPS/LTCH PPS proposed rule, we used 
the Office of the Actuary's February 2015 Medicare DSH estimates, which 
are based on data from the December 2014 update of the Medicare 
Hospital Cost Report Information System (HCRIS), 2012 cost report data 
provided to CMS by IHS hospitals, and the FY 2015 IPPS/LTCH PPS final 
rule IPPS Impact File, published in conjunction with the publication of 
the FY 2015 IPPS/LTCH PPS final rule. Because SCHs that are projected 
to be paid under their hospital-specific rate are not subject to the 
provisions of section 1886(r) of the Act, these hospitals were excluded 
from the February 2015 Medicare DSH estimates. Furthermore, because 
section 1886(r) of the Act specifies that the uncompensated care 
payment is in addition to the empirically justified DSH payment (or 25 
percent of DSH payments that would be made without regard to section 
1886(r)), Maryland hospitals participating in the Maryland All-Payer 
Model and hospitals participating in the Rural Community Hospital 
Demonstration that do not receive DSH payments also are excluded from 
the Office of the Actuary's Medicare DSH estimates.
    Using the data sources discussed above, the Office of the Actuary 
uses the most recently submitted Medicare cost report data to identify 
current Medicare DSH payments and the most recent DSH payment 
adjustments provided in the IPPS Impact File, and applies inflation 
updates and assumptions for future changes in utilization and case-mix 
to estimate Medicare DSH payments for the upcoming fiscal year. The 
February 2015 Office of the Actuary estimate for Medicare DSH payments 
for FY 2016, without regard to the application of section 1886(r)(1) of 
the Act, is approximately $13.338 billion. This estimate excludes 
Maryland hospitals participating in the Maryland All-Payer Model, SCHs 
paid under their hospital-specific payment rate, and hospitals 
participating in the Rural Community Hospital Demonstration, as 
indicated earlier. Therefore, based on the February 2015 estimate, the 
estimate for empirically justified Medicare DSH payments for FY 2016, 
with the application of section 1886(r)(1) of the Act, is $3.335 
billion (25 percent of the total amount estimated). Under Sec.  
412.l06(g)(1)(i) of the regulations, Factor 1 is the difference between 
these two estimates of the Office of the Actuary. Therefore, in this 
proposed rule, we are proposing that Factor 1 for FY 2016 is 
$10,003,425,327.39 ($13,337,900,436.52 minus $3,334,475,109.13). We are 
inviting public comments on our proposed calculation of Factor 1 for FY 
2016.
    The Office of the Actuary's estimates for FY 2016 begin with a 
baseline of $11.632 billion in Medicare DSH expenditures for FY 2012. 
The following table shows the factors applied to update this baseline 
through the current estimate for FY 2016:

[[Page 24485]]



                        Factors Applied for FY 2013 Through FY 2016 To Estimate Medicare DSH Expenditures Using FY 2012 Baseline
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                           Estimated DSH
                            FY                                 Update         Discharge       Case-Mix          Other           Total       payments (in
                                                                                                                                              billion)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2013.....................................................           1.028          0.9844           1.014          1.0139        1.040394     $12.102
2014.....................................................           1.009          0.9595           1.015          0.9993         0.98197     $11.884
2015.....................................................           1.014          0.9885           1.005          1.0485        1.056207     $12.552
2016.....................................................           1.011          1.0012           1.005          1.0446        1.062645     $13.338
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In this table, the discharge column shows the increase in the 
number of Medicare fee-for-service (FFS) inpatient hospital discharges. 
The figures for FYs 2013 and 2014 are based on Medicare claims data 
that have been adjusted by a completion factor. The discharge figure 
for FY 2015 is based on preliminary data for 2015. The discharge figure 
for FY 2016 is an assumption based on recent trends recovering back to 
the long-term trend and assumptions related to how many beneficiaries 
will be enrolled in Medicare FFS and also Medicare Advantage (MA) 
plans. The case-mix column shows the increase in case-mix for IPPS 
hospitals. The case-mix figures for FYs 2013 and 2014 are based on 
actual data adjusted by a completion factor. The FY 2015 and FY 2016 
increases are based on the recommendation of the 2010-2011 Medicare 
Technical Review Panel. The ``other'' column shows the increase in 
other factors that contribute to the Medicare DSH estimates. These 
factors include the difference between the total inpatient hospital 
discharges and the IPPS discharges, various adjustments to the payment 
rates that have been included over the years but are not reflected in 
the other columns (such as the increase in rates for the Cape Cod 
litigation and the reduction in rates for the 2-midnight stay policy). 
In addition, the ``other'' column includes a factor for the Medicaid 
expansion due to the Affordable Care Act.
    The next table below shows the factors that are included in the 
``Update'' column of the above table:

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                         Documentation
                                                                      Market basket   Affordable Care    Multifactor       and coding      Total update
                                 FY                                     percentage      Act payment      productivity      percentage       percentage
                                                                                         reductions       adjustment       adjustment
--------------------------------------------------------------------------------------------------------------------------------------------------------
2013...............................................................              2.6             -0.1             -0.7             -1.0              2.8
2014...............................................................              2.5             -0.3             -0.5             -0.8              0.9
2015...............................................................              2.9             -0.2             -0.5             -0.8              1.4
2016...............................................................              2.7             -0.2             -0.6             -0.8              1.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: All numbers are based on the FY 2016 President's Budget projections.

(2) Calculation of Proposed Factor 2 for FY 2016
    Section 1886(r)(2)(B) of the Act establishes Factor 2 in the 
calculation of the uncompensated care payment. Specifically, section 
1886(r)(2)(B)(i) of the Act provides that for each of FYs 2014, 2015, 
2016, and 2017, a factor equal to 1 minus the percent change in the 
percent of individuals under the age of 65 who are uninsured, as 
determined by comparing the percent of such individuals (I) who are 
uninsured in 2013, the last year before coverage expansion under the 
Affordable Care Act (as calculated by the Secretary based on the most 
recent estimates available from the Director of the Congressional 
Budget Office before a vote in either House on the Health Care and 
Education Reconciliation Act of 2010 that, if determined in the 
affirmative, would clear such Act for enrollment); and (II) who are 
uninsured in the most recent period for which data are available (as so 
calculated), minus 0.1 percentage point for FY 2014 and minus 0.2 
percentage point for each of FYs 2015, 2016, and 2017.
    Section 1886(r)(2)(B)(i)(I) of the Act further indicates that the 
percent of individuals under 65 without insurance in 2013 must be the 
percent of such individuals who are uninsured in 2013, the last year 
before coverage expansion under the Affordable Care Act (as calculated 
by the Secretary based on the most recent estimates available from the 
Director of the Congressional Budget Office before a vote in either 
House on the Health Care and Education Reconciliation Act of 2010 that, 
if determined in the affirmative, would clear such Act for enrollment). 
The Health Care and Education Reconciliation Act (Pub. L. 111-152) was 
enacted on March 30, 2010. It was passed in the House of 
Representatives on March 21, 2010, and by the Senate on March 25, 2010. 
Because the House of Representatives was the first House to vote on the 
Health Care and Education Reconciliation Act of 2010 on March 21, 2010, 
we have determined that the most recent estimate available from the 
Director of the Congressional Budget Office ``before a vote in either 
House on the Health Care and Education Reconciliation Act of 2010 . . 
.'' (emphasis added) appeared in a March 20, 2010 letter from the 
director of the CBO to the Speaker of the House. Therefore, we believe 
that only the estimates in this March 20, 2010 letter meet the 
statutory requirement under section 1886(r)(2)(B)(i)(I) of the Act. (To 
view the March 20, 2010 letter, we refer readers to the Web site at: 
http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/113xx/doc11379/amendreconprop.pdf.)
    In its March 20, 2010 letter to the Speaker of the House of 
Representatives, the CBO provided two estimates of the ``post-policy 
uninsured population.'' The first estimate is of the ``Insured Share of 
the Nonelderly Population Including All Residents'' (82 percent) and 
the second estimate is of the ``Insured Share of the Nonelderly 
Population Excluding Unauthorized Immigrants'' (83 percent). In the FY 
2014 IPPS/LTCH PPS final rule (78 FR 50631), we used the first estimate 
that includes all residents, including

[[Page 24486]]

unauthorized immigrants. We stated that we believe this estimate is 
most consistent with the statute, which requires us to measure ``the 
percent of individuals under the age of 65 who are uninsured'' and 
provides no exclusions except for individuals over the age of 65. In 
addition, we stated that we believe that this estimate more fully 
reflects the levels of uninsurance in the United States that influence 
uncompensated care for hospitals than the estimate that reflects only 
legal residents. The March 20, 2010 CBO letter reports these figures as 
the estimated percentage of individuals with insurance. However, 
because section 1886(r)(2)(B)(i) of the Act requires that we compare 
the percent of individuals who are uninsured in the applicable year 
with the percent of individuals who were uninsured in 2013, in the FY 
2014 IPPS/LTCH PPS final rule, we used the CBO insurance rate figure 
and subtracted that amount from 100 percent (that is the total 
population without regard to insurance status) to estimate the 2013 
baseline percent of individuals without insurance. Therefore, for FYs 
2014 through 2017, our estimate of the uninsurance percentage for 2013 
is 18 percent.
    Section 1886(r)(2)(B)(i) of the Act requires that we compare the 
baseline uninsurance rate to the percent of such individuals ``who are 
uninsured in the most recent period for which data is available (as so 
calculated).'' In the FY 2014 and FY 2015 IPPS/LTCH PPS final rules (78 
FR 50634 and 79 FR 50014), we used the same data source, the most 
recent available CBO estimates, to calculate this percent of 
individuals without insurance. In response to public comments, we also 
agreed that we should normalize the CBO estimates, which are based on 
the calendar year, for the Federal fiscal years for which each 
calculation of Factor 2 is made (78 FR 50633). Therefore, for this FY 
2016 IPPS/LTCH PPS proposed rule, we used the CBO's January 2015 
estimates of the effects of the Affordable Care Act on health insurance 
coverage (which are available at http://www.cbo.gov/sites/default/files/cbofiles/attachments/43900-2014-04-ACAtables2.pdf) to calculate 
the percent of individuals without insurance. The CBO's January 2015 
estimate of individuals under the age of 65 with insurance in CY 2015 
is 87 percent. Therefore, the CBO's most recent estimate of the rate of 
uninsurance in CY 2015 is 13 percent (that is, 100 percent minus 87 
percent.) Similarly, the CBO's January 2015 estimate of individuals 
under the age of 65 with insurance in CY 2016 is 89 percent. Therefore, 
the CBO's most recent estimate of the rate of uninsurance in CY 2016 
available for this proposed rule is 11 percent (that is, 100 percent 
minus 89 percent.)
    The calculation of the proposed Factor 2 for FY 2016, employing a 
weighted average of the CBO projections for CY 2015 and CY 2016, is as 
follows:

 CY 2015 rate of insurance coverage (January 2015 CBO 
estimate): 87 percent.
 CY 2016 rate of insurance coverage (January 2015 CBO 
estimate): 89 percent.
 FY 2016 rate of insurance coverage: (87 percent * .25)+(89 
percent * .75) = 88.5 percent.
 Percent of individuals without insurance for 2013 (March 2010 
CBO estimate): 18 percent
 Percent of individuals without insurance for FY 2016 (weighted 
average): 11.5 percent

    1-((0.115-0.18)/0.18) = 1-0.3611 = 0.6389 (63.89 percent)

    0.6389 (63.89 percent)-.002 (0.2 percentage points for FY 2016 
under section 1886(r)(2)(B)(i) of the Act) = 0.6369 or 63.69 percent

    0.6369 = Factor 2

    Therefore, the proposed Factor 2 for FY 2016 is 63.69 percent. Our 
proposal for Factor 2 is subject to change if more recent CBO estimates 
of the insurance rate become available at the time of the preparation 
of the final rule. We are inviting public comments on our proposed 
calculation of Factor 2 for FY 2016.
    The FY 2016 Proposed Uncompensated Care Amount is: 
$10,003,425,327.39 x 0.6369 = $6,371,181,591.01.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
FY 2016 Proposed Uncompensated Care Total Available    $6,371,181,591.01
------------------------------------------------------------------------

(3) Calculation of Proposed Factor 3 for FY 2016
    Section 1886(r)(2)(C) of the Act defines Factor 3 in the 
calculation of the uncompensated care payment. As we have discussed 
earlier, section 1886(r)(2)(C) of the Act states that Factor 3 is equal 
to the percent, for each subsection (d) hospital, that represents the 
quotient of (i) the amount of uncompensated care for such hospital for 
a period selected by the Secretary (as estimated by the Secretary, 
based on appropriate data (including, in the case where the Secretary 
determines alternative data are available that is a better proxy for 
the costs of subsection (d) hospitals for treating the uninsured, the 
use of such alternative data)); and (ii) the aggregate amount of 
uncompensated care for all subsection (d) hospitals that receive a 
payment under section 1886(r) of the Act for such period (as so 
estimated, based on such data).
    Therefore, Factor 3 is a hospital-specific value that expresses the 
proportion of the estimated uncompensated care amount for each 
subsection (d) hospital and each subsection (d) Puerto Rico hospital 
with the potential to receive Medicare DSH payments relative to the 
estimated uncompensated care amount for all hospitals estimated to 
receive Medicare DSH payments in the fiscal year for which the 
uncompensated care payment is to be made. Factor 3 is applied to the 
product of Factor 1 and Factor 2 to determine the amount of the 
uncompensated care payment that each eligible hospital will receive for 
FY 2014 and subsequent fiscal years. In order to implement the 
statutory requirements for this factor of the uncompensated care 
payment formula, it was necessary to determine: (1) The definition of 
uncompensated care or, in other words, the specific items that are to 
be included in the numerator (that is, the estimated uncompensated care 
amount for an individual hospital) and the denominator (that is, the 
estimated uncompensated care amount for all hospitals estimated to 
receive Medicare DSH payments in the applicable fiscal year); (2) the 
data source(s) for the estimated uncompensated care amount; and (3) the 
timing and manner of computing the quotient for each hospital estimated 
to receive Medicare DSH payments. The statute instructs the Secretary 
to estimate the amounts of uncompensated care for a period based on 
appropriate data. In addition, we note that the statute permits the 
Secretary to use alternative data in the case where the Secretary 
determines that such alternative data are available that are a better 
proxy for the costs of subsection (d) hospitals for treating 
individuals who are uninsured.
    In the course of considering how to determine Factor 3 during the 
rulemaking process for FY 2014, we considered defining the amount of 
uncompensated care for a hospital as the uncompensated care costs of 
each hospital and determined that Worksheet S-10 of the Medicare cost 
report potentially provides the most complete data regarding 
uncompensated care costs for Medicare hospitals. However, because of 
concerns regarding variations in the data reported on the Worksheet S-
10 and the completeness of these

[[Page 24487]]

data, we did not propose to use data from the Worksheet S-10 to 
determine the amount of uncompensated care for FY 2014, the first year 
this provision was in effect, or for FY 2015. We instead employed the 
utilization of insured low-income patients, defined as inpatient days 
of Medicaid patients plus inpatient days of Medicare SSI patients as 
defined in 42 CFR 412.106(b)(4) and 412.106(b)(2)(i), respectively, to 
determine Factor 3. We believed that this alternative data, which are 
currently reported on the Medicare cost report, would be a better proxy 
for the amount of uncompensated care provided by hospitals. We also 
indicated that we were expecting reporting on the Worksheet S-10 to 
improve over time and remained convinced that the Worksheet S-10 could 
ultimately serve as an appropriate source of more direct data regarding 
uncompensated care costs for purposes of determining Factor 3 once 
hospitals gain greater experience and are submitting more accurate and 
consistent data through this reporting mechanism.
    For FY 2016, we believe it remains premature to propose the use of 
Worksheet S-10 for purposes of determining Factor 3 and, therefore, are 
proposing to continue to employ the utilization of insured low-income 
patients (defined as inpatient days of Medicaid patients plus inpatient 
days of Medicare SSI patients as defined in Sec.  412.106(b)(4) and 
Sec.  412.106(b)(2)(i), respectively) to determine Factor 3. We believe 
this methodology would give hospitals more time to learn how to submit 
accurate and consistent data through Worksheet S-10, as well as give 
CMS more time to continue to work with the hospital community and 
others to develop the appropriate clarifications and revisions to 
Worksheet S-10 to ensure standardized and consistent reporting of all 
data elements. Accordingly, we are proposing that, for FY 2016, CMS 
will base its estimates of the amount of hospital uncompensated care on 
utilization data for Medicaid and Medicare SSI patients, as determined 
by CMS in accordance with Sec.  412.106(b)(2)(i) and (b)(4). We still 
intend to propose through future rulemaking the use of the Worksheet S-
10 data for purposes of determining Factor 3. We are inviting public 
comments on this proposal to continue to use insured low-income days 
(that is, to use data for Medicaid and Medicare SSI patient days 
determined in accordance with Sec.  412.106(b)(2)(i) and (b)(4) as a 
proxy as permitted by statute) to determine Factor 3 for FY 2016.
    As we did for the FY 2014 IPPS/LTCH PPS proposed rule and FY 2015 
IPPS/LTCH proposed rule, we will publish on the CMS Web site a table 
listing Factor 3 for all hospitals that we estimate would receive 
empirically justified Medicare DSH payments in FY 2016 (that is, 
hospitals that we project would receive interim uncompensated care 
payments during the fiscal year), and for the remaining subsection (d) 
hospitals and subsection (d) Puerto Rico hospitals that have the 
potential of receiving a DSH payment in the event that they receive an 
empirically justified Medicare DSH payment for the fiscal year as 
determined at cost report settlement. Hospitals will have 60 days from 
the date of public display of this FY 2016 IPPS/LTCH PPS proposed rule 
to review these tables and notify CMS in writing of a change in a 
hospital's subsection (d) hospital status, such as if a hospital has 
closed or converted to a CAH. Comments can be submitted to the CMS 
inbox at [email protected]. After the publication of the FY 
2016 IPPS/LTCH final rule, hospitals will have until August 31, 2015, 
to review and submit comments on the accuracy of these tables. Comments 
can be submitted to the CMS inbox at [email protected] through 
August 31, 2015, and any changes to Factor 3 will be posted on the CMS 
Web site prior to October 1, 2015.
    The statute also allows the Secretary the discretion to determine 
the time periods from which we will derive the data to estimate the 
numerator and the denominator of the Factor 3 quotient. Specifically, 
section 1886(r)(2)(C)(i) of the Act defines the numerator of the 
quotient as the amount of uncompensated care for such hospital for a 
period selected by the Secretary. Section 1886(r)(2)(C)(ii) of the Act 
defines the denominator as the aggregate amount of uncompensated care 
for all subsection (d) hospitals that receive a payment under section 
1886(r) for such period. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50638), we adopted a process of making interim payments with final cost 
report settlement for both the empirically justified Medicare DSH 
payments and the uncompensated care payments required by section 3133 
of the Affordable Care Act. Consistent with that process, we also 
determined the time period from which to calculate the numerator and 
denominator of the Factor 3 quotient in a way that would be consistent 
with making interim and final payments. Specifically, we must have 
Factor 3 values available for hospitals that we estimate will qualify 
for Medicare DSH payments using the most recently available historical 
data and for those hospitals that we do not estimate will qualify for 
Medicare DSH payments but that may ultimately qualify for Medicare DSH 
payments at the time of cost report settlement.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50018), we finalized 
a policy to use the most recently available full year of Medicare cost 
report data for determining Medicaid days and the most recently 
available SSI ratios. This is consistent with the policy we adopted in 
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50638) of calculating the 
numerator and the denominator of Factor 3 for hospitals based on the 
most recently available full year of Medicare cost report data 
(including the most recently available data that may be used to update 
the SSI ratios) with respect to a Federal fiscal year. In other words, 
we use data from the most recently available full year cost report for 
the Medicaid days, the most recent cost report data submitted to CMS by 
IHS hospitals, and the most recently available SSI ratios (that is, 
latest available SSI ratios before the beginning of the Federal fiscal 
year) for the Medicare SSI days. Therefore, to estimate Factor 3 for FY 
2015, we used data from the most recently available full year cost 
report and the most recent cost report data submitted to CMS by IHS 
hospitals for the Medicaid days and the most recently available SSI 
ratios, which for FY 2015 were data obtained from the 2011/2012 cost 
reports and the 2010 cost report data submitted by IHS hospitals for 
the Medicaid days, and the FY 2012 SSI ratios for the Medicare SSI 
days.
    Since the publication of the FY 2015 IPPS/LTCH PPS final rule, we 
have been informed by the hospital community that they are experiencing 
difficulties with submitting accurate data for Medicaid days within the 
timeframes noted in the Provider Reimbursement Manual, Part 2 for a 
variety of reasons, such as their ability to receive eligibility data 
from State Medicaid agencies. (As outlined in Section 104, Chapter 1, 
of the Provider Reimbursement Manual, Part 2, a hospital generally has 
5 months after the close of its cost reporting period to file its cost 
report.) In addition, we have been informed that there is variation in 
the ability of hospitals and MACs, respectively, to submit and accept 
amended cost report data in time for the computation of Factor 3. While 
we continue to believe that it is important to use data that are as 
recent as possible, we recognize that from time to time the balance 
between recency and accuracy may require refinement. In the case of 
Factor 3, because we make prospective determinations of the 
uncompensated

[[Page 24488]]

care payment without reconciliation, we believe that it would increase 
the accuracy of the data used to determine Factor 3, and accordingly 
each eligible hospital's allocation of the overall uncompensated care 
amount, if we provided hospitals with more time to submit these data 
and MACs with more time to consider these submitted data before they 
are used in the computation of Factor 3. As we described in the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50018), it is not possible for us to 
wait for a later database update of the cost report data to calculate 
the final Factor 3 amount for the final rule because this could cause 
delay in the publication of the final rule. Therefore, we are unable to 
provide hospitals additional time to submit supplemental data, or for 
their MAC to consider and accept those data as applicable and 
appropriate. One alternative would be to use slightly older data within 
the most recent extract of the hospital cost report data in the HCRIS 
database. We believe that this would allow hospitals more time to 
submit data and MACs more time to consider and accept such data as 
applicable and appropriate.
    Therefore, for the computation of Factor 3 for FY 2016, we are 
proposing to hold constant the cost report years used to calculate 
Factor 3 and to use data from the 12-month 2012 or 2011 cost reports 
and, in the case of IHS hospitals, the 2012 cost report data submitted 
to CMS by IHS hospitals. However, because a more recent HCRIS database 
is available at the time of this rulemaking, we are proposing that we 
continue to use the most recent HCRIS database extract available to us 
at the time of this annual rulemaking cycle. We note that, as in prior 
years, if the more recent of the two cost reporting periods does not 
reflect data for a 12-month period, we would use data from the earlier 
of the two periods so long as that earlier period reflects data for a 
period of 12 months. If neither of the two periods reflects 12 months, 
we would use the period that reflected a longer amount of time. We are 
proposing to codify this change for FY 2016 by amending the regulations 
at Sec.  412.106(g)(1)(iii)(C). We are inviting public comments on this 
proposal, which we describe more fully below.
    For the FY 2015 IPPS/LTCH PPS final rule, we used the more recent 
of the full year 2012 or full year 2011 data from the March 2014 update 
of the hospital cost report data in the HCRIS database and cost report 
data submitted to CMS by IHS hospitals as of March 2014 to obtain the 
Medicaid days to calculate Factor 3. In addition, we used the FY 2012 
SSI ratios published on the following CMS Web site to calculate Factor 
3: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html.
    In contrast, under our proposal, for FY 2016, we would use the more 
recent of the full year 2012 or full year 2011 data from the March 2015 
update of the hospital cost report data in the HCRIS database and the 
2012 cost report data submitted to CMS by IHS hospitals to obtain the 
Medicaid days to calculate Factor 3. In addition, to calculate Factor 3 
for FY 2016, we anticipate that, under our proposal discussed above, we 
would use the FY 2013 SSI ratios to be published on the following CMS 
Web site when they become available: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html. For 
illustration purposes, in Table 18 associated with this proposed rule 
(which is available via the Internet on the CMS Web site), we compute 
Factor 3 using the more recent of the full year 2012 or 2011 data from 
the December 2014 update of the hospital cost report data in the HCRIS 
database to obtain the Medicaid days and the FY 2012 SSI ratios 
published on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/dsh.html. We anticipate using 
the more recent of the full year 2012 or 2011 data from the March 2015 
update of the hospital cost report data in the HCRIS database to obtain 
the Medicaid days and the FY 2013 SSI ratios to determine the final 
Factor 3 for FY 2016.
    For subsequent years, if we propose and finalize a policy of using 
insured low-income days in computing Factor 3, we intend to continue to 
use the most recent HCRIS database extract at the time of the annual 
rulemaking cycle, and to use the subsequent year of cost reports as 
applicable using the methodology described above (that is, to advance 
the 12-month cost reports by 1 year). We note that, starting with the 
2013 cost reports, data for IHS hospitals will be included in the 
HCRIS. Therefore, if an IHS hospital has a 12-month 2013 cost reporting 
period in the HCRIS database, we will not need to use the 2012 data 
separately submitted to CMS by the IHS hospital. For example, if we 
finalize for FY 2017, a policy under which Factor 3 is determined on 
the basis of insured low-income days, this approach would result in the 
use of the more recent of the 12-month 2013 or 2012 cost reports in the 
most recent HCRIS database extract available at the time of rulemaking. 
In addition, for any subsequent years in which we finalize a policy to 
use insured low-income days to compute Factor 3, our intention would be 
to continue to use the most recently available SSI ratio data to 
calculate Factor 3 at the time of annual rulemaking. We believe that it 
is appropriate to state our intentions regarding the specific data we 
would use in the event Factor 3 is determined on the basis of low-
income insured days for subsequent years to provide hospitals with as 
much guidance as possible so they may best consider how and when to 
submit cost report information in the future. We note that we will make 
proposals with regard to our methodology for calculating Factor 3 for 
subsequent years through notice-and-comment rulemaking.
    We are proposing to continue the policies that were finalized in 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50020) to address several 
specific issues concerning the process and data to be employed in 
determining Factor 3 in the case of hospital mergers for FY 2016 and 
subsequent fiscal years. In order to confirm mergers and ensure the 
accuracy of the data used to determine each merged hospital's 
uncompensated care payment, we will publish a table on the CMS Web 
site, in conjunction with the issuance of each Federal fiscal year's 
IPPS/LTCH PPS proposed and final rules, that contains a list of the 
mergers that we are aware of and the computed uncompensated care 
payment for each merged hospital. Hospitals have 60 days from the date 
of public display of each year's IPPS/LTCH PPS proposed rule to review 
these tables and notify CMS in writing of any inaccuracies. After the 
publication of the IPPS/LTCH PPS final rule, hospitals will have until 
August 31 of that year (for FY 2016, the deadline is August 31, 2015) 
to review and submit comments on the accuracy of these tables for the 
applicable fiscal year. Comments can be submitted to our inbox at 
[email protected] through August 31, and any changes to Factor 
3 will be posted on the CMS Web site prior to the start of the 
applicable fiscal year on October 1. We are inviting public comments on 
our proposal to continue these policies concerning the process and data 
to be employed in determining Factor 3 in the case of hospital mergers 
as described above.

E. Hospital Readmissions Reduction Program: Proposed Changes for FY 
2016 Through FY 2017 (Sec. Sec.  412.150 through 412.154)

1. Statutory Basis for the Hospital Readmissions Reduction Program
    Section 3025 of the Affordable Care Act, as amended by section 
10309 of the Affordable Care Act, added a new

[[Page 24489]]

section 1886(q) to the Act. Section 1886(q) of the Act establishes the 
``Hospital Readmissions Reduction Program,'' effective for discharges 
from an ``applicable hospital'' beginning on or after October 1, 2012, 
under which payments to those applicable hospitals may be reduced to 
account for certain excess readmissions.
    Section 1886(q)(1) of the Act sets forth the methodology by which 
payments to ``applicable hospitals'' will be adjusted to account for 
excess readmissions. In accordance with section 1886(q)(1) of the Act, 
payments for discharges from an ``applicable hospital'' will be an 
amount equal to the product of the ``base operating DRG payment 
amount'' and the adjustment factor for the hospital for the fiscal 
year. That is, ``base operating DRG payments'' are reduced by a 
hospital-specific adjustment factor that accounts for the hospital's 
excess readmissions. Section 1886(q)(2) of the Act defines the base 
operating DRG payment amount as the payment amount that would otherwise 
be made under section 1886(d) of the Act (determined without regard to 
section 1886(o) of the Act [the Hospital VBP Program]) for a discharge 
if this subsection did not apply; reduced by any portion of such 
payment amount that is attributable to payments under paragraphs 
(5)(A), (5)(B), (5)(F), and (12) of section 1886(d) of the Act. 
Paragraphs (5)(A), (5)(B), (5)(F), and (12) of section 1886(d) of the 
Act refer to outlier payments, IME payments, DSH adjustment payments, 
and add-on payments for low-volume hospitals, respectively.
    Furthermore, section 1886(q)(2)(B) of the Act specifies special 
rules for defining the payment amount that would otherwise be made 
under section 1886(d) of the Act for certain hospitals, including 
policies for SCHs and for MDHs for FY 2013. In the FY 2013 IPPS/LTCH 
PPS final rule (77 FR 53374), we finalized policies to implement the 
statutory provisions related to the definition of ``base operating DRG 
payment amount'' with respect to those hospitals.
    Section 1886(q)(3)(A) of the Act defines the ``adjustment factor'' 
for an applicable hospital for a fiscal year as equal to the greater of 
(i) the ratio described in subparagraph (B) for the hospital for the 
applicable period (as defined in paragraph (5)(D)) for such fiscal 
year; or (ii) the floor adjustment factor specified in subparagraph 
(C). Section 1886(q)(3)(B) of the Act, in turn, describes the ratio 
used to calculate the adjustment factor. It states that the ratio is 
equal to 1 minus the ratio of--(i) the aggregate payments for excess 
readmissions and (ii) the aggregate payments for all discharges. 
Section 1886(q)(3)(C) of the Act establishes the floor adjustment 
factor, which is set at 0.97 for FY 2015 and subsequent fiscal years.
    Section 1886(q)(4) of the Act defines the terms ``aggregate 
payments for excess readmissions'' and ``aggregate payments for all 
discharges'' for an applicable hospital for the applicable period. The 
term ``aggregate payments for excess readmissions'' is defined in 
section 1886(q)(4)(A) of the Act as the sum, for applicable conditions 
of the product, for each applicable condition, of (i) the base 
operating DRG payment amount for such hospital for such applicable 
period for such condition; (ii) the number of admissions for such 
condition for such hospital for such applicable period; and (iii) the 
excess readmissions ratio for such hospital for such applicable period 
minus 1. The ``excess readmissions ratio'' is a hospital-specific ratio 
based on each applicable condition. Specifically, section 1886(q)(4)(C) 
of the Act defines the excess readmissions ratio as the ratio of 
actual-over-expected readmissions; specifically, the ratio of ``risk-
adjusted readmissions based on actual readmissions'' for an applicable 
hospital for each applicable condition, to the ``risk-adjusted expected 
readmissions'' for the applicable hospital for the applicable 
condition.
    Section 1886(q)(5) of the Act provides definitions of ``applicable 
condition,'' ``expansion of applicable conditions,'' ``applicable 
hospital,'' ``applicable period,'' and ``readmission.'' The term 
``applicable condition'' (which is addressed in detail in section 
IV.C.3.a. of the FY 2012 IPPS/LTCH PPS final rule (76 FR 51665 through 
51666)) is defined as a condition or procedure selected by the 
Secretary among conditions and procedures for which: (i) Readmissions 
represent conditions or procedures that are high volume or high 
expenditures and (ii) measures of such readmissions have been endorsed 
by the entity with a contract under section 1890(a) of the Act and such 
endorsed measures have exclusions for readmissions that are unrelated 
to the prior discharge (such as a planned readmission or transfer to 
another applicable hospital). Section 1886(q)(5)(B) of the Act also 
requires the Secretary, beginning in FY 2015, to the extent 
practicable, to expand the applicable conditions beyond the three 
conditions for which measures have been endorsed to the additional four 
conditions that have been identified by the MedPAC in its report to 
Congress in June 2007 and to other conditions and procedures as 
determined appropriate by the Secretary.
    Section 1886(q)(5)(C) of the Act defines ``applicable hospital,'' 
that is, a hospital subject to the Hospital Readmissions Reduction 
Program, as a subsection (d) hospital or a hospital that is paid under 
section 1814(b)(3) of the Act, as the case may be. The term 
``applicable period,'' as defined under section 1886(q)(5)(D) of the 
Act, means, with respect to a fiscal year, such period as the Secretary 
shall specify. As explained in the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51671), the ``applicable period'' is the period during which data 
are collected in order to calculate various ratios and payment 
adjustments under the Hospital Readmissions Reduction Program.
    Section 1886(q)(6) of the Act sets forth the public reporting 
requirements for hospital-specific readmission rates. Section 
1886(q)(7) of the Act limits administrative and judicial review of 
certain determinations made pursuant to section 1886(q) of the Act. 
Finally, section 1886(q)(8) of the Act requires the Secretary to 
collect data on readmission rates for all hospital inpatients (not just 
Medicare patients) for a broad range of both subsection (d) and 
nonsubsection (d) hospitals in order to calculate the hospital-specific 
readmission rates for all such hospital inpatients and to publicly 
report these ``all-patient'' readmission rates.
2. Regulatory Background
    The payment adjustment factor set forth in section 1886(q) of the 
Act did not apply to discharges until FY 2013. In the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51660 through 51676), we addressed the issues of 
the selection of readmission measures and the calculation of the excess 
readmissions ratio, which will be used, in part, to calculate the 
readmissions adjustment factor. Specifically, in that final rule, we 
finalized policies that relate to the portions of section 1886(q) of 
the Act that address the selection of and measures for the applicable 
conditions, the definitions of ``readmission'' and ``applicable 
period,'' and the methodology for calculating the excess readmissions 
ratio. We also established policies with respect to measures for 
readmission for the applicable conditions and our methodology for 
calculating the excess readmissions ratio.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through 
53401), we finalized policies that relate to the portions of section 
1886(q) of the Act that address the calculation of the hospital 
readmission payment

[[Page 24490]]

adjustment factor and the process by which hospitals can review and 
correct their data. Specifically, in that final rule, we addressed the 
base operating DRG payment amount, aggregate payments for excess 
readmissions and aggregate payments for all discharges, the adjustment 
factor, applicable hospital, limitations on review, and reporting of 
hospital-specific information, including the process for hospitals to 
review readmission information and submit corrections. We also 
established a new Subpart I under 42 CFR part 412 (Sec. Sec.  412.150 
through 412.154) to codify rules for implementing the Hospital 
Readmissions Reduction Program.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50649 through 
50676), we finalized our policies that relate to refinement of the 
readmissions measures and related methodology for the current 
applicable conditions, expansion of the ``applicable conditions'' for 
FY 2015 and subsequent fiscal years, and clarification of the process 
for reporting hospital-specific information, including the opportunity 
to review and submit corrections. We also established policies related 
to the calculation of the adjustment factor for FY 2014.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50024 through 
50048), we made refinements to the readmissions measures and related 
methodology for applicable conditions for FY 2015 and subsequent fiscal 
years, expanded the ``applicable conditions'' for FY 2017 and 
subsequent fiscal years, discussed the maintenance of technical 
specifications for quality measures, and described a waiver from the 
Hospital Readmissions Reduction Program for hospitals formerly paid 
under section 1814(b)(3) of the Act (Sec.  412.154(d)). We also 
specified the applicable period for FY 2015 and made changes to the 
calculation of the aggregate payments for excess readmissions to 
include two additional applicable conditions for the FY 2015 payment 
determination.
3. Overview of Proposed Policies Changes for the FY 2016 and FY 2017 
Hospital Readmissions Reduction Program
    In this proposed rule, we are proposing to--
     Make a refinement to the pneumonia readmissions measure, 
which would expand the measure cohort, for the FY 2017 payment 
determination and subsequent years (section IV.E.4. of the preamble of 
this proposed rule); and
     Adopt an extraordinary circumstance exception policy to 
address hospitals that experience a disaster or other extraordinary 
circumstance beginning in FY 2016 and for subsequent years (section 
IV.E.9. of the preamble of this proposed rule).
4. Proposed Refinement of the Hospital 30-Day, All-Cause, Risk-
Standardized Readmission Rate (RSRR) Following Pneumonia 
Hospitalization Measure Cohort for the FY 2017 Payment Determination 
and Subsequent Years
a. Background
    In this proposed rule, for the FY 2017 payment determination and 
subsequent years, we are proposing a refinement of the currently 
National Quality Forum (NQF) endorsed CMS Hospital 30-Day, All-Cause, 
Risk-Standardized Readmission Rate (RSRR) following Pneumonia 
Hospitalization measure (NQF #0506) (hereafter referred to as the CMS 
30-Day Pneumonia Readmission Measure (NQF #0506)), which expands the 
measure cohort. For the purposes of describing the refinement of this 
measure, we note that ``cohort'' is defined as the hospitalizations, or 
``index admissions,'' that are included in the measure. This cohort is 
the set of hospitalizations that meet all of the inclusion and 
exclusion criteria, and we are proposing an expansion to this set of 
hospitalizations. The previously adopted CMS 30-day Pneumonia 
Readmission Measure (NQF #0506) included hospitalizations for patients 
with a principal discharge diagnosis of pneumonia indicating viral or 
bacterial pneumonia. For measure cohort details of the currently 
implemented measure, we refer readers to the measure methodology report 
and measure risk adjustment statistical model on our Web site at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    This proposed measure refinement would expand the measure cohort to 
include hospitalizations for patients with a principal discharge 
diagnosis of aspiration pneumonia and for patients with a principal 
discharge diagnosis of either sepsis or respiratory failure who also 
have a secondary diagnosis of pneumonia present on admission. Including 
such patients would better represent the complete population of a 
hospital's patients who are receiving clinical management and treatment 
for pneumonia, as well as to ensure the measure includes more complete 
and comparable populations across hospitals. In addition, use of 
comparable populations would reduce measurement bias resulting from 
different coding practices seen across hospitals. We believe that 
measure results derived from refinement of the measure cohort in the 
manner we are proposing would improve the measure's assessment of 
avoidable readmissions and more accurately reflect quality and outcome 
for pneumonia patients. The determination to refine the measure cohort 
was based on our evaluation of both the frequency and variation in 
utilization of these diagnosis codes, and as such coding practices have 
been described in recently published studies. The rationale for 
expanding the measure cohort for the CMS 30-Day Pneumonia Readmission 
Measure (NQF #0506) is further described in section VIII.A.6.b. of the 
preamble of this proposed rule under our discussion of proposed 
refinements for the Hospital IQR Program.
b. Overview of Measure Cohort Change
    The proposed measure refinement would expand the cohort to include 
hospitalizations for patients with a principal discharge diagnosis of 
aspiration pneumonia and for patients with a principal discharge 
diagnosis of either sepsis or respiratory failure who also have a 
secondary diagnosis of pneumonia that is coded as present on admission. 
The data sources, exclusion criteria, and assessment of the outcome of 
readmission remain unchanged.
    The proposed refinement of the CMS 30-Day Pneumonia Readmission 
Measure (NQF #0506) with this expanded measure cohort was reviewed by 
the Measure Applications Partnership (MAP), which conditionally 
supported use of the measure update for the Hospital Readmissions 
Reduction Program pending NQF review of the measure update and 
appropriate consideration under the NQF sociodemographic status pilot, 
if required, as detailed in its Pre-Rulemaking 2015 MAP Recommendations 
Report available at: https://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx. This measure will be submitted to 
NQF for reendorsement when the appropriate project has its call for 
measures in 2015.
    We note that during the MAP Hospital Workgroup and MAP Coordinating 
Committee in-person meetings, some members discussed the benefit of a 
phased approach that would first allow for public reporting of the 
refined measure before implementing it in a pay-for-performance program 
in order to allow providers to gain experience with the measure 
refinement, while other members expressed concern that this would delay 
implementation of an improved measure and also cause

[[Page 24491]]

alignment issues and potential confusion among providers. The MAP 
supported the use of the measure refinement without stipulating prior 
public reporting as a condition of support. However, we acknowledge the 
importance of this consideration and took it into account when 
determining to propose implementation of the measure refinement in the 
Hospital Readmissions Reduction Program beginning with the FY 2017 
payment determination.
    We considered other options in proposing when to implement the 
refinement of the CMS 30-Day Pneumonia Readmission Measure (NQF #0506) 
in the Hospital Readmissions Reduction Program, including the option to 
implement the measure refinement beginning with the FY 2018 payment 
determination. Delaying implementation of the measure refinement until 
FY 2018 would allow hospitals to gain more experience with the impact 
of the measure refinement on their measure results and excess 
readmissions ratios. However, it also would mean delaying use of an 
improved measure that we believe will better represent the complete 
population of a hospital's pneumonia patients and better reflect 
comparable pneumonia patients across hospitals. Delaying implementation 
of the measure refinement for the Hospital Readmissions Reduction 
Program could also potentially increase confusion among hospitals as 
well as raise alignment issues with other CMS hospital inpatient 
quality reporting and payment programs that use the same measure.
    After considering these options, we are proposing to begin with the 
FY 2017 payment determination to implement the refinement of the CMS 
30-Day Pneumonia Readmission Measure (NQF #0506) in the Hospital 
Readmissions Reduction Program. We believe that after weighing the 
considerations, the proposed measure refinement should be incorporated 
into the Hospital Readmissions Reduction Program as soon as statutorily 
and operationally feasible, primarily because improving the measure in 
the manner we are proposing will greatly improve the measure's 
assessment of quality and outcome for pneumonia patients and, 
therefore, its implementation should not be unnecessarily delayed.
c. Risk Adjustment
    The risk adjustment and statistical modeling approach as well as 
the measure calculation remain unchanged from the previously adopted 
measure. However, we did confirm the use of current risk-adjustment 
variables in the expanded measure cohort by confirming their 
association with the outcome. We also examined additional risk 
variables leading to the addition of a few additional risk variables in 
the measure. For the full measure specifications of the proposed 
refinement of the measure cohort, we refer readers to the CMS Web site 
at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
d. Anticipated Effects of Refinement of Hospital 30-Day, All-Cause, 
Risk-Standardized Readmission Rate (RSRR) Following Pneumonia 
Hospitalization Measure (NQF #0506) Cohort
    Using administrative claims data for FY 2015 (that is, discharges 
between July 2010 and June 2013), we analyzed and simulated the effect 
of the proposed measure cohort refinements on the CMS 30-Day Pneumonia 
Readmission Measure (NQF #0506) as if these changes had been applied 
for the Hospital Readmissions Reduction Program FY 2015 payment 
determination. We note that these statistics are for illustrative 
purposes only, and we are not proposing to revise the measure 
calculations for FY 2015, nor for FY 2016. Rather, we are proposing to 
apply these changes to the CMS 30-Day Pneumonia Readmission Measure 
(NQF #0506) for the FY 2017 payment determination and subsequent years. 
Based on our analysis, we anticipate that expanding the measure cohort 
to include a broader population of patients would add a large number of 
patients, as well as additional hospitals (which would now meet the 
minimum threshold of 25 eligible cases), to the CMS 30-Day Pneumonia 
Readmission Measure (NQF #0506). In the FY 2012 IPPS/LTCH PPS final 
rule (76 FR 51672), we established that if a hospital has fewer than 25 
eligible cases for a measure, we will assign the hospital to a separate 
category indicating that the number of cases is too small to reliably 
indicate how well the hospital is performing. These cases are still 
used to calculate the measure. However, for hospitals with fewer than 
25 eligible cases, the hospital's readmission rates and interval 
estimates will not be publicly reported for the measure. The increase 
in the size of the measure cohort proposed in this proposed rule would 
change results for many hospitals and would change the number of 
hospitals that have greater than 25 cases.
    The previously adopted pneumonia readmission measure cohort for the 
Hospital Readmissions Reduction Program included 976,471 patients and 
3,137 hospitals for FY 2015. We noted the following effects for the CMS 
30-Day Pneumonia Readmission Measure (NQF #0506) if the expanded cohort 
had been applied for FY 2015: (1) The expansion of the readmission 
cohort would include an additional 634,519 patients (representing a 65 
percent increase, for a total measure cohort of 1,610,990 patients); 
(2) an additional 42 hospitals (representing a 1.3 percent increase) 
would meet the minimum 25 patient cases volume threshold over the 3-
year applicable period and would be publicly reported for the measure; 
(3) patients with a principal discharge diagnosis of aspiration 
pneumonia and patients with a principal discharge diagnosis of sepsis 
or respiratory failure who also have a secondary diagnosis of pneumonia 
present on admission would represent 40 percent of the total expanded 
measure cohort; (4) the national observed readmission rate would 
increase by 0.9 absolute percentage points; and, (5) the proposed 
cohort refinement would affect the excess readmissions ratios for some 
hospitals. A detailed description of the refinement to the CMS 30-Day 
Pneumonia Readmission Measure (NQF #0506) and the effects of the 
measure update are available on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
e. Calculating the Excess Readmissions Ratio
    The proposed refinement of the measure cohort for the CMS 30-Day 
Pneumonia Readmission Measure (NQF #0506) would use the same 
methodology and statistical modeling approach as the previously adopted 
CMS 30-Day Pneumonia Readmission Measure (NQF #0506) for the Hospital 
Readmissions Reduction Program, as well as the other Hospital 
Readmissions Reduction Program measures. We published a detailed 
description of how the readmission measures estimate the excess 
readmissions ratios in the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53380 through 53381).
    We note that the set of hospitals for which this refined measure 
would be calculated for the Hospital Readmissions Reduction Program 
differs from those used in calculations for the Hospital IQR Program. 
The Hospital Readmissions Reduction Program includes only subsection 
(d) hospitals as defined in section 1886(d)(1)(B) of the Act (and, if 
not waived from participating, those hospitals paid under section 
1814(b)(3) of the Act), while the

[[Page 24492]]

Hospital IQR Program calculations include non-IPPS hospitals, such as 
CAHs, cancer hospitals, and hospitals located in the Territories of the 
United States. However, we believe that adoption of the refinement to 
the measure cohort for the CMS 30-Day Pneumonia Readmission Measure 
(NQF #0506) would be appropriate for both programs.
    In summary, we are proposing a refinement of the NQF endorsed CMS 
30-Day Pneumonia Readmission Measure (NQF #0506), which expands the 
measure cohort, in the Hospital Readmissions Reduction Program for the 
FY 2017 payment determination and subsequent years.
    We are inviting public comment on this proposal.
5. Maintenance of Technical Specifications for Quality Measures
    We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50039) for a discussion of the maintenance of technical specifications 
for quality measures for the Hospital Readmissions Reduction Program. 
Technical specifications of the readmission measures are provided on 
our Web site in the Measure Methodology Reports at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. Additional resources 
about the Hospital Readmissions Reduction Program and measure technical 
specifications are on the QualityNet Web site on the Resources page at: 
http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772412995.
6. Floor Adjustment Factor for FY 2016 (Sec.  412.154(c)(2))
    Section 1886(q)(3)(A) of the Act defines the ``adjustment factor'' 
for an applicable hospital for a fiscal year as equal to the greater of 
(i) the ratio described in subparagraph (B) for the hospital for the 
applicable period (as defined in paragraph (5)(D)) for such fiscal 
year; or (ii) the floor adjustment factor specified in subparagraph 
(C). Section 1886(q)(3)(B) of the Act, in turn, describes the ratio 
used to calculate the adjustment factor. Specifically, it states that 
the ratio is equal to 1 minus the ratio of--(i) the aggregate payments 
for excess readmissions and (ii) the aggregate payments for all 
discharges. The calculation of this ratio is codified at Sec.  
412.154(c)(1) of the regulations. Section 1886(q)(3)(C) of the Act 
specifies the floor adjustment factor, which is set at 0.97 for FY 2015 
and subsequent fiscal years. We codified the floor adjustment factor at 
Sec.  412.154(c)(2) of the regulations (77 FR 53386).
    Consistent with section 1886(q)(3) of the Act, codified at Sec.  
412.154(c)(2), the adjustment factor is either the greater of the ratio 
or, for FY 2015 and subsequent fiscal years, a floor adjustment factor 
of 0.97. Under our established policy, the ratio is rounded to the 
fourth decimal place. In other words, for FY 2015 and subsequent fiscal 
years, a hospital subject to the Hospital Readmissions Reduction 
Program will have an adjustment factor that is between 1.0 (no 
reduction) and 0.9700 (greatest possible reduction).
7. Proposed Applicable Period for FY 2016
    Under section 1886(q)(5)(D) of the Act, the Secretary has the 
authority to specify the applicable period with respect to a fiscal 
year under the Hospital Readmissions Reduction Program. In the FY 2012 
IPPS/LTCH PPS final rule (76 FR 51671), we finalized our policy to use 
3 years of claims data to calculate the readmission measures. In the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53675), we codified the definition 
of ``applicable period'' in the regulations at 42 CFR 412.152 as the 3-
year period from which data are collected in order to calculate excess 
readmissions ratios and adjustments for the fiscal year, which includes 
aggregate payments for excess readmissions and aggregate payments for 
all discharges used in the calculation of the payment adjustment.
    Consistent with the definition specified at Sec.  412.152, we 
established that the applicable period for FY 2014 under the Hospital 
Readmissions Reduction Program is the 3-year period from July 1, 2009, 
to June 30, 2012. That is, we determined the excess readmissions ratios 
and calculate the payment adjustment (including aggregate payments for 
excess readmissions and aggregate payments for all discharges) for FY 
2014 using data from the 3-year time period of July 1, 2009 through 
June 30, 2012, as this was the most recent available 3-year period of 
data upon which to base these calculations (78 FR 50669).
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 40 through 50041), 
for FY 2015, consistent with the definition specified at Sec.  412.152, 
we finalized an ``applicable period'' for the Hospital Readmissions 
Reduction Program to be the 3-year period from July 1, 2010 through 
June 30, 2013. That is, we determined the excess readmissions ratios 
and the payment adjustment (including aggregate payments for excess 
readmissions and aggregate payments for all discharges) for FY 2015 
using data from the 3-year time period of July 1, 2010 through June 30, 
2013.
    In this proposed rule, for FY 2016, consistent with the definition 
specified at Sec.  412.152, we are proposing an ``applicable period'' 
for the Hospital Readmissions Reduction Program to be the 3-year period 
from July 1, 2011 through June 30, 2014. In other words, we are 
proposing that the excess readmissions ratios and the payment 
adjustment (including aggregate payments for excess readmissions and 
aggregate payments for all discharges) for FY 2016 using data from the 
3-year time period of July 1, 2011 through June 30, 2014.
8. Proposed Calculation of Aggregate Payments for Excess Readmissions 
for FY 2016
a. Background
    Under the Hospital Readmissions Reduction Program the ``base 
operating DRG payment amount'' defined at Sec.  412.152 is used both to 
determine the readmission adjustment factor that accounts for excess 
readmissions under section 1886(q)(3) of the Act and to determine which 
payment amounts will be adjusted to account for excess readmissions 
under section 1886(q) of the Act. Consistent with section 1886(q)(2) of 
the Act, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 through 
53383), under the regulations at Sec.  412.152, we define the ``base 
operating DRG payment amount'' and specify that it does not include 
adjustments or add-on payments for IME, DSH, outliers and low-volume 
hospitals as required by section 1886(q)(2) of the Act. Furthermore, 
consistent with section 1886(q)(2)(B)(i) of the Act, for SCHs and for 
MDHs for FY 2013, the definition of ``base operating DRG payment 
amount'' at Sec.  412.152 excludes the difference between the 
hospital's applicable hospital-specific payment rate and the Federal 
payment rate.
    For FY 2015 and subsequent years, for purposes of calculating the 
payment adjustment factors and applying the payment methodology, in the 
FY 2015 IPPS/LTCH PPS final rule (79 FR 50041 through 50048), we 
finalized our policy that the base operating DRG payment amount for 
MDHs includes the difference between the hospital-specific payment rate 
and the Federal payment rate (as applicable). Section 1886(q)(3)(B) of 
the Act specifies the ratio used to calculate the adjustment factor 
under the Hospital Readmissions Reduction Program. It states that the 
ratio is equal to 1 minus the ratio of--(i) the aggregate payments for 
excess

[[Page 24493]]

readmissions and (ii) the aggregate payments for all discharges. The 
definition of ``aggregate payments for excess readmissions'' and 
``aggregate payments for all discharges,'' as well as a methodology for 
calculating the numerator of the ratio (aggregate payments for excess 
readmissions) and the denominator of the ratio (aggregate payments for 
all discharges) are codified at Sec.  412.154(c)(2) of the regulations 
(77 FR 53387).
    Section 1886(q)(4) of the Act sets forth the definitions of 
``aggregate payments for excess readmissions'' and ``aggregate payments 
for all discharges'' for an applicable hospital for the applicable 
period. The term ``aggregate payments for excess readmissions'' is 
defined in section 1886(q)(4)(A) of the Act as for a hospital for an 
applicable period, the sum, for applicable conditions of the product, 
for each applicable condition, of (i) the base operating DRG payment 
amount for such hospital for such applicable period for such condition; 
(ii) the number of admissions for such condition for such hospital for 
such applicable period; and (iii) the excess readmissions ratio for 
such hospital for such applicable period minus 1. We codified this 
definition of ``aggregate payments for excess readmissions'' under the 
regulations at Sec.  412.152 as the product, for each applicable 
condition, of: (1) The base operating DRG payment amount for the 
hospital for the applicable period for such condition; (2) the number 
of admissions for such condition for the hospital for the applicable 
period; and (3) the excess readmissions ratio for the hospital for the 
applicable period minus 1 (77 FR 53675).
    The excess readmissions ratio is a hospital-specific ratio 
calculated for each applicable condition. Specifically, section 
1886(q)(4)(C) of the Act defines the excess readmissions ratio as the 
ratio of ``risk-adjusted readmissions based on actual readmissions'' 
for an applicable hospital for each applicable condition, to the 
``risk-adjusted expected readmissions'' for the applicable hospital for 
the applicable condition. The methodology for the calculation of the 
excess readmissions ratio was finalized in the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51673). ``Aggregate payments for excess 
readmissions'' is the numerator of the ratio used to calculate the 
adjustment factor under the Hospital Readmissions Reduction Program (as 
described in further detail later in this section).
    The term ``aggregate payments for all discharges'' is defined at 
section 1886(q)(4)(B) of the Act as for a hospital for an applicable 
period, the sum of the base operating DRG payment amounts for all 
discharges for all conditions from such hospital for such applicable 
period. ``Aggregate payments for all discharges'' is the denominator of 
the ratio used to calculate the adjustment factor under the Hospital 
Readmissions Reduction Program. We codified this definition of 
``aggregate payments for all discharges'' under the regulations at 
Sec.  412.152 (77 FR 53387).
    We finalized the inclusion of one additional applicable condition, 
Patients Readmitted Following Coronary Artery Bypass Graft (CABG) 
Surgery, in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50033 through 
50039) effective for FY 2017. We will address the inclusion of this 
additional measure in the calculation of the readmissions payment 
adjustment for FY 2017 in the FY 2017 rulemaking.
b. Proposed Calculation of Aggregate Payments for Excess Readmissions 
for FY 2016
    As discussed above, when calculating the numerator (aggregate 
payments for excess readmissions), we determine the base operating DRG 
payments for the applicable period. ``Aggregate payments for excess 
readmissions'' (the numerator) is defined as the sum, for applicable 
conditions of the product, for each applicable condition, of (i) the 
base operating DRG payment amount for such hospital for such applicable 
period for such condition; (ii) the number of admissions for such 
condition for such hospital for such applicable period; and (iii) the 
excess readmissions ratio for such hospital for such applicable period 
minus 1.
    When determining the base operating DRG payment amount for an 
individual hospital for such applicable period for such condition, we 
use Medicare inpatient claims from the MedPAR file with discharge dates 
that are within the same applicable period to calculate the excess 
readmissions ratio. We use MedPAR claims data as our data source for 
determining aggregate payments for excess readmissions and aggregate 
payments for all discharges, as this data source is consistent with the 
claims data source used in IPPS rulemaking to determine IPPS rates.
    For FY 2016, we are proposing to use MedPAR claims with discharge 
dates that are on or after July 1, 2011, and no later than June 30, 
2014. Under our established methodology, we use the update of the 
MedPAR file for each Federal fiscal year, which is updated 6 months 
after the end of each Federal fiscal year within the applicable period, 
as our data source (that is, the March updates of the respective 
Federal fiscal year MedPAR files) for the final rules.
    The FY 2011 through FY 2014 MedPAR data files can be purchased from 
CMS. Use of these files allows the public to verify the readmissions 
adjustment factors. Interested individuals may order these files 
through the CMS Web site at: http://www.cms.hhs.gov/LimitedDataSets/ by 
clicking on MedPAR Limited Data Set (LDS)-Hospital (National). This Web 
page describes the files and provides directions and detailed 
instructions for how to order the data sets. Persons placing an order 
must send the following: A Letter of Request, the LDS Data Use 
Agreement and Research Protocol (refer to the Web site for further 
instructions), the LDS Form, and a check for $3,655 to:
     If using the U.S. Postal Service: Centers for Medicare and 
Medicaid Services, RDDC Account, Accounting Division, P.O. Box 7520, 
Baltimore, MD 21207-0520.
     If using express mail: Centers for Medicare and Medicaid 
Services, OFM/Division of Accounting--RDDC, Mailstop C#-07-11, 7500 
Security Boulevard, Baltimore, MD 21244-1850.
    For this FY 2016 proposed rule, we are proposing to determine 
aggregate payments for excess readmissions and aggregate payments for 
all discharges using data from MedPAR claims with discharge dates that 
are on or after July 1, 2011, and no later than June 30, 2014. However, 
we note that, for the purpose of modeling the proposed FY 2016 
readmissions payment adjustment factors for this proposed rule, we use 
excess readmissions ratios for applicable hospitals from the FY 2015 
Hospital Readmissions Reduction Program applicable period. For the FY 
2016 final rule, applicable hospitals will have had the opportunity to 
review and correct data from the proposed FY 2016 applicable period of 
July 1, 2011 to June 30, 2014, before they are made public under our 
policy regarding the reporting of hospital-specific information, which 
we discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53374 
through 53401).
    In this proposed rule, for FY 2016, we are proposing to use MedPAR 
data from July 1, 2011 through June 30, 2014. Specifically, in this 
proposed rule, we are using the March 2012 update of the FY 2011 MedPAR 
file to identify claims within FY 2011 with discharges dates that are 
on or after July 1, 2011, the March 2013 update of the FY 2012 MedPAR 
file to identify claims within FY 2012, the March 2014 update of the FY 
2013 MedPAR file to identify claims within FY 2013, and the December 
2014

[[Page 24494]]

update of the FY 2014 MedPAR file to identify claims within FY 2014 
with discharge dates no later than June 30, 2014. For the final rule, 
we are proposing to use the same MedPAR files as listed above for 
claims within FY 2011, FY 2012 and FY 2013. For claims within FY 2014, 
we are proposing to use in the final rule the March 2015 update of the 
FY 2014 MedPAR file.
    In order to identify the admissions for each condition, to 
calculate the aggregate payments for excess readmissions for an 
individual hospital, for FY 2016, we are proposing to identify each 
applicable condition using the ICD-9-CM codes used to identify 
applicable conditions to calculate the excess readmissions ratios. 
(Although the compliance date for the ICD-10-CM and ICD10-PCS code sets 
is October 1, 2015 (79 FR 45128 through 45134), these proposed policies 
apply to data periods prior to this compliance date.) Under our 
existing policy, we identify eligible hospitalizations and readmissions 
of Medicare patients discharged from an applicable hospital having a 
principal diagnosis for the measured condition in an applicable period 
(76 FR 51669). The discharge diagnoses for each applicable condition 
are based on a list of specific ICD-9-CM codes for that condition. 
These codes are posted on the QualityNet Web site at: http://www.QualityNet.org > Hospital-Inpatient > Claims-Based Measures > 
Readmission Measures > Measure Methodology.
    We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50041 through 50048) for a discussion of how we identify the applicable 
conditions to calculate the aggregate payments for excess readmissions 
for FY 2015. For FY 2016, we are proposing to follow this same 
approach.
    In this proposed rule, for FY 2016, we are proposing to continue to 
apply the same exclusions to the claims in the MedPAR file as we 
applied for FY 2015 for the current applicable conditions. For FY 2016, 
in order to have the same types of admissions to calculate aggregate 
payments for excess readmissions as is used to calculate the excess 
readmissions ratio, we are proposing to identify admissions for the 
AMI, HF, PN, THA/TKA, COPD applicable conditions, for the purposes of 
calculating aggregate payments for excess readmissions as follows:
     We would exclude admissions that are identified as an 
applicable condition if the patient died in the hospital, as identified 
by the discharge status code on the MedPAR claim.
     We would exclude admissions identified as an applicable 
condition for which the patient was transferred to another provider 
that provides acute care hospital services (that is, a CAH or an IPPS 
hospital), as identified through examination of contiguous stays in 
MedPAR at other hospitals.
     We would exclude admissions identified as an applicable 
condition for patients who are under the age of 65, as identified by 
linking the claim information to the information provided in the 
Medicare Enrollment Database.
     For conditions identified as AMI, we would exclude claims 
that are same day discharges, as identified by the admission date and 
discharge date on the MedPAR claim.
     We would exclude admissions for patients who did not have 
Medicare Parts A and B FFS enrollment in the 12 months prior to the 
index admission, based on the information provided in the Medicare 
Enrollment Database.
     We would exclude admissions for patients without at least 
30 days post-discharge enrollment in Medicare Parts A and B FFS, based 
on the information provided in the Medicare Enrollment Database.
     We would exclude all multiple admissions within 30 days of 
a prior index admission's discharge date, as identified in the MedPAR 
file, consistent with how multiple admissions within 30 days of an 
index admission are excluded from the calculation of the excess 
readmissions ratio.
    These exclusions are consistent with our current methodology, which 
was established in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50048).
    Furthermore, we would only identify Medicare FFS claims that meet 
the criteria (that is, claims paid for under Medicare Part C (Medicare 
Advantage) would not be included in this calculation), consistent with 
the methodology to calculate excess readmissions ratios based solely on 
admissions and readmissions for Medicare FFS patients. Therefore, 
consistent with our established methodology, for FY 2016, we would 
exclude admissions for patients enrolled in Medicare Advantage as 
identified in the Medicare Enrollment Database. This policy is 
consistent with how admissions for Medicare Advantage patients are 
identified in the calculation of the excess readmissions ratios under 
our established methodology. The tables below list the ICD-9-CM codes 
we are proposing to use to identify each applicable condition to 
calculate the aggregate payments for the excess readmissions proposal 
for FY 2016. These ICD-9-CM codes also would be used to identify the 
applicable conditions to calculate the excess readmissions ratios, 
consistent with our established policy (76 FR 51673 through 51676).

                                 ICD-9-CM Codes to Identify Pneumonia (PN) Cases
----------------------------------------------------------------------------------------------------------------
                ICD-9-CM code                                         Description of code
----------------------------------------------------------------------------------------------------------------
480.0.......................................  Pneumonia due to adenovirus.
480.1.......................................  Pneumonia due to respiratory syncytial virus.
480.2.......................................  Pneumonia due to parainfluenza virus.
480.3.......................................  Pneumonia due to SARS-associated coronavirus.
480.8.......................................  Viral pneumonia: Pneumonia due to other virus not elsewhere
                                               classified.
480.9.......................................  Viral pneumonia unspecified.
481.........................................  Pneumococcal pneumonia [streptococcus pneumoniae pneumonia].
482.0.......................................  Pneumonia due to klebsiella pneumoniae.
482.1.......................................  Pneumonia due to pseudomonas.
482.2.......................................  Pneumonia due to hemophilus influenzae [h. influenzae].
482.30......................................  Pneumonia due to streptococcus unspecified.
482.31......................................  Pneumonia due to streptococcus group a.
482.32......................................  Pneumonia due to streptococcus group b.
482.39......................................  Pneumonia due to other streptococcus.
482.40......................................  Pneumonia due to staphylococcus unspecified.
482.41......................................  Pneumonia due to staphylococcus aureus.
482.42......................................  Methicillin Resistant Pneumonia due to Staphylococcus Aureus.
482.49......................................  Other staphylococcus pneumonia.

[[Page 24495]]

 
482.81......................................  Pneumonia due to anaerobes.
482.82......................................  Pneumonia due to escherichia coli [e.coli].
482.83......................................  Pneumonia due to other gram-negative bacteria.
482.84......................................  Pneumonia due to legionnaires' disease.
482.89......................................  Pneumonia due to other specified bacteria.
482.9.......................................  Bacterial pneumonia unspecified.
483.0.......................................  Pneumonia due to mycoplasma pneumoniae.
483.1.......................................  Pneumonia due to chlamydia.
483.8.......................................  Pneumonia due to other specified organism.
485.........................................  Bronchopneumonia organism unspecified.
486.........................................  Pneumonia organism unspecified.
487.0.......................................  Influenza with pneumonia.
488.11......................................  Influenza due to identified novel H1N1 influenza virus with
                                               pneumonia.
----------------------------------------------------------------------------------------------------------------


                               ICD-9-CM Codes to Identify Heart Failure (HF) Cases
----------------------------------------------------------------------------------------------------------------
                ICD-9-CM code                                          Code description
----------------------------------------------------------------------------------------------------------------
402.01......................................  Hypertensive heart disease, malignant, with heart failure.
402.11......................................  Hypertensive heart disease, benign, with heart failure.
402.91......................................  Hypertensive heart disease, unspecified, with heart failure.
404.01......................................  Hypertensive heart and chronic kidney disease, malignant, with
                                               heart failure and with chronic kidney disease stage I through
                                               stage IV, or unspecified.
404.03......................................  Hypertensive heart and chronic kidney disease, malignant, with
                                               heart failure and with chronic kidney disease stage V or end
                                               stage renal disease.
404.11......................................  Hypertensive heart and chronic kidney disease, benign, with heart
                                               failure and with chronic kidney disease stage I through stage IV,
                                               or unspecified.
404.13......................................  Hypertensive heart and chronic kidney disease, benign, with heart
                                               failure and with chronic kidney disease stage I through stage IV,
                                               or unspecified failure and chronic kidney disease stage V or end
                                               stage renal disease.
404.91......................................  Hypertensive heart and chronic kidney disease, unspecified, with
                                               heart failure and chronic kidney disease stage V or end stage
                                               renal disease heart failure and with chronic kidney disease stage
                                               I through stage IV, or unspecified.
404.93......................................  Hypertensive heart and chronic kidney disease, unspecified, with
                                               heart failure and chronic kidney disease stage V or end stage
                                               renal disease.
428.xx......................................  Heart Failure.
----------------------------------------------------------------------------------------------------------------


                       ICD-9-CM Codes to Identify Acute Myocardial Infarction (AMI) Cases
----------------------------------------------------------------------------------------------------------------
                ICD-9-CM code                                         Description of code
----------------------------------------------------------------------------------------------------------------
410.00......................................  AMI (anterolateral wall)--episode of care unspecified.
410.01......................................  AMI (anterolateral wall)--initial episode of care.
410.10......................................  AMI (other anterior wall)--episode of care unspecified.
410.11......................................  AMI (other anterior wall)--initial episode of care.
410.20......................................  AMI (inferolateral wall)--episode of care unspecified.
410.21......................................  AMI (inferolateral wall)--initial episode of care.
410.30......................................  AMI (inferoposterior wall)--episode of care unspecified.
410.31......................................  AMI (inferoposterior wall)--initial episode of care.
410.40......................................  AMI (other inferior wall)--episode of care unspecified.
410.41......................................  AMI (other inferior wall)--initial episode of care.
410.50......................................  AMI (other lateral wall)--episode of care unspecified.
410.51......................................  AMI (other lateral wall)--initial episode of care.
410.60......................................  AMI (true posterior wall)--episode of care unspecified.
410.61......................................  AMI (true posterior wall)--initial episode of care.
410.70......................................  AMI (subendocardial)--episode of care unspecified.
410.71......................................  AMI (subendocardial)--initial episode of care.
410.80......................................  AMI (other specified site)--episode of care unspecified.
410.81......................................  AMI (other specified site)--initial episode of care.
410.90......................................  AMI (unspecified site)--episode of care unspecified.
410.91......................................  AMI (unspecified site)--initial episode of care.
----------------------------------------------------------------------------------------------------------------


                  ICD-9-CM Codes to Identify Chronic Obstructive Pulmonary Disease (COPD) Cases
----------------------------------------------------------------------------------------------------------------
                ICD-9-CM code                                         Description of code
----------------------------------------------------------------------------------------------------------------
491.21......................................  Obstructive chronic bronchitis; With (acute) exacerbation; acute
                                               exacerbation of COPD, decompensated COPD, decompensated COPD with
                                               exacerbation.
491.22......................................  Obstructive chronic bronchitis; with acute bronchitis.
491.8.......................................  Other chronic bronchitis. Chronic: tracheitis, tracheobronchitis..
491.9.......................................  Unspecified chronic bronchitis.

[[Page 24496]]

 
492.8.......................................  Other emphysema; emphysema (lung or pulmonary): NOS, centriacinar,
                                               centrilobular, obstructive, panacinar, panlobular, unilateral,
                                               vesicular. MacLeod's syndrome; Swyer-James syndrome; unilateral
                                               hyperlucent lung.
493.20......................................  Chronic obstructive asthma; asthma with COPD, chronic asthmatic
                                               bronchitis, unspecified.
493.21......................................  Chronic obstructive asthma; asthma with COPD, chronic asthmatic
                                               bronchitis, with status asthmaticus.
493.22......................................  Chronic obstructive asthma; asthma with COPD, chronic asthmatic
                                               bronchitis, with (acute) exacerbation.
496.........................................  Chronic: nonspecific lung disease, obstructive lung disease,
                                               obstructive pulmonary disease (COPD) NOS. NOTE: This code is not
                                               to be used with any code from categories 491-493.
518.81 *....................................  Other diseases of lung; acute respiratory failure; respiratory
                                               failure NOS.
518.82 *....................................  Other diseases of lung; acute respiratory failure; other pulmonary
                                               insufficiency, acute respiratory distress.
518.84 *....................................  Other diseases of lung; acute respiratory failure; acute and
                                               chronic respiratory failure.
799.1 *.....................................  Other ill-defined and unknown causes of morbidity and mortality;
                                               respiratory arrest, cardiorespiratory failure.
----------------------------------------------------------------------------------------------------------------
* Principal diagnosis when combined with a secondary diagnosis of AECOPD (491.21, 491.22, 493.21, or 493.22).


            ICD-9-CM Codes To Identify Total Hip Arthroplasty/Total Knee Arthroplaty (THA/TKA) Cases
----------------------------------------------------------------------------------------------------------------
                ICD-9-CM code                                         Description of code
----------------------------------------------------------------------------------------------------------------
81.51.......................................  Total hip arthroplasty.
81.54.......................................  Total knee arthroplasty.
----------------------------------------------------------------------------------------------------------------

    For FY 2016, we are proposing to calculate aggregate payments for 
excess readmissions, using MedPAR claims from July 1, 2011 to June 30, 
2014, to identify applicable conditions based on the same ICD-9-CM 
codes used to identify the conditions for the readmissions measures, 
and to apply the proposed exclusions for the types of admissions 
discussed above. To calculate aggregate payments for excess 
readmissions, we are proposing to calculate the base operating DRG 
payment amounts for all claims in the 3-year applicable period for each 
applicable condition (AMI, HF, PN, COPD and THA/TKA) based on the 
claims we have identified as described above. Once we have calculated 
the base operating DRG amounts for all the claims for the five 
applicable conditions, we are proposing to sum the base operating DRG 
payments amounts by each condition, resulting in five summed amounts, 
one amount for each of the five applicable conditions. We are proposing 
to then multiply the amount for each condition by the respective excess 
readmissions ratio minus 1 when that excess readmissions ratio is 
greater than 1, which indicates that a hospital has performed, with 
respect to readmissions for that applicable condition, worse than the 
average hospital with similar patients. Each product in this 
computation represents the payments for excess readmissions for that 
condition. We are proposing to then sum the resulting products which 
represent a hospital's proposed ``aggregate payments for excess 
readmissions'' (the numerator of the ratio). Because this calculation 
is performed separately for each of the five conditions, a hospital's 
excess readmissions ratio must be less than or equal to 1 on each 
measure to aggregate payments for excess readmissions (and therefore a 
payment reduction under the Hospital Readmissions Reduction Program). 
We note that we are not proposing any changes to our existing 
methodology to calculate ``aggregate payments for all discharges'' (the 
denominator of the ratio).
    We are proposing the following methodology for FY 2016 as displayed 
in the chart below.

  Formulas To Calculate the Readmissions Adjustment Factor for FY 2016
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Aggregate payments for excess readmissions = [sum of base operating DRG
 payments for AMI x (Excess Readmissions Ratio for AMI-1)] + [sum of
 base operating DRG payments for HF x (Excess Readmissions Ratio for HF-
 1)] + [sum of base operating DRG payments for PN x (Excess Readmissions
 Ratio for PN-1)] + [sum of base operating DRG payments for COPD) x
 (Excess Readmissions Ratio for COPD-1)] + [sum of base operating DRG
 payments for THA/TKA x (Excess Readmissions Ratio for THA/TKA-1)].
 
* We note that if a hospital's excess readmissions ratio for a condition
 is less than/equal to 1, there are no aggregate payments for excess
 readmissions for that condition included in this calculation.
 
Aggregate payments for all discharges = sum of base operating DRG
 payments for all discharges.
 
Ratio = 1 - (Aggregate payments for excess readmissions/Aggregate
 payments for all discharges).
 
Proposed Readmissions Adjustment Factor for FY 2016 is the higher of the
 ratio or 0.9700.
 
* Based on claims data from July 1, 2011 to June 30, 2014 for FY 2016.
------------------------------------------------------------------------

    We are inviting public comment on these proposals.
9. Proposed Extraordinary Circumstance Exception Policy for the 
Hospital Readmissions Reduction Program Beginning in FY 2016 and for 
Subsequent Years
a. Background
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28117), we 
welcomed public comment on whether a potential waiver or exception 
policy for hospitals located in areas that experience disasters or 
other extraordinary circumstances should be implemented, and the policy 
and operational considerations of such an extraordinary circumstance 
exception policy for the Hospital Readmissions

[[Page 24497]]

Reduction Program. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50048), we indicated that we received many comments in support of CMS 
establishing a formal extraordinary circumstance exception policy under 
the Hospital Readmissions Reduction Program. We also previously 
indicated that any specific proposals related to the implementation of 
an extraordinary circumstance exception policy would be proposed 
through notice-and-comment rulemaking. After further consideration of 
commenters' support of CMS establishing an extraordinary circumstance 
exception policy for the Hospital Readmissions Reduction Program, we 
agree with commenters that it may be possible for a hospital to 
experience a certain period of time during which it is not able to 
submit all of its claims (from which readmission measures data are 
derived) in an accurate or timely fashion due to an extraordinary 
circumstance beyond its control, and that a policy for taking into 
account such a circumstance should be proposed. Section 1886(q)(5)(D) 
of the Act permits the Secretary to determine the ``applicable period'' 
for readmissions data collection, and we believe that the statute 
allows us to determine that the period not include times when hospitals 
may encounter extraordinary circumstances.
    In developing this proposed extraordinary circumstance exception 
policy for the Hospital Readmissions Reduction Program beginning in FY 
2016 and for subsequent years, we considered a policy and process 
similar to that for the Hospital IQR Program, as finalized in the FY 
2012 IPPS/LTCH PPS final rule (76 FR 51651), modified in the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50836) (designation of a non-CEO 
hospital contact), and further modified in the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 50277) (amended Sec.  412.140(c)(2) to refer to 
``extension or exemption'' instead of the former ``extension or 
waiver''). We also considered how best to align an extraordinary 
circumstance exception policy for the Hospital Readmissions Reduction 
Program with existing extraordinary circumstance exception policies for 
other IPPS quality reporting and payment programs, such as the Hospital 
VBP Program, to the extent feasible.
    We considered the feasibility and implications of excluding data 
for certain readmission measures for a limited period of time from the 
calculations for a hospital's excess readmissions ratios for the 
applicable performance period. By minimizing the data excluded from the 
program, the proposed policy would enable affected hospitals to 
continue to participate in the Hospital Readmissions Reduction Program 
for a given fiscal year if they otherwise continue to meet applicable 
measure minimum threshold requirements. We believe that this approach 
could help alleviate the reporting burden for a hospital that is 
adversely impacted by a natural disaster or other extraordinary 
circumstance beyond its control, while enabling the hospital to 
continue to participate in the Hospital Readmissions Reduction Program.
b. Requests for an Extraordinary Circumstance Exception
    Based upon our prior experience with the Hospital IQR Program and 
the Hospital VBP Program, we anticipate the need to provide exceptions 
to only a small number of hospitals affected by a natural disaster or 
other extraordinary circumstance. During the review of a hospital's 
request for an extraordinary circumstance exception, we would maintain 
the general principle that providing high quality of care and ensuring 
patient safety is of paramount importance. We do not intend to allow a 
hospital to use this proposed policy and the request process to seek 
exclusion from the Hospital Readmissions Reduction Program in its 
entirety for a given fiscal year(s) solely because of experiencing an 
extraordinary circumstance. Rather, we intend to provide relief for a 
hospital whose ability to accurately or timely submit all of its claims 
(from which readmission measures data are derived) has been negatively 
impacted as a direct result of experiencing a significant disaster or 
other extraordinary circumstance beyond the control of the hospital.
    We are proposing that the request process for an extraordinary 
circumstance exception begin with the submission of an extraordinary 
circumstance exception request form by a hospital within 90 calendar 
days of the natural disaster or other extraordinary circumstance. We 
believe that the 90-calendar day timeframe is an appropriate period of 
time for a hospital to determine whether to submit an extraordinary 
circumstance exception request. It is also the same length of time as 
the current time period allowed under the Hospital VBP Program. Under 
this proposed policy, a hospital would be able to request a Hospital 
Readmissions Reduction Program extraordinary circumstance exception at 
the same time it may request a similar exception under the Hospital IQR 
Program, the Hospital VBP Program, and the HAC Reduction Program (if 
the proposed extraordinary circumstance exception policy for the HAC 
Reduction Program as described in section IV.G.8. of the preamble of 
this proposed rule is adopted). The extraordinary circumstance 
exception request form would be made available on the QualityNet Web 
site.
    The following minimum set of information would be required to 
submit the request:
     Hospital CCN;
     Hospital name;
     Hospital Chief Executive Officer (CEO) and any other 
designated personnel contact information, including name, email 
address, telephone number, and mailing address (must include a physical 
address; a post office box address is not acceptable);
     Hospital's reason for requesting an exception, including:
    ++ CMS program name (for example, the Hospital Readmissions 
Reduction Program, the Hospital VBP Program, or the Hospital IQR 
Program);
    ++ The measure(s) and submission quarters affected by the 
extraordinary circumstance that the hospital is seeking an exception 
for should be accompanied with the specific reasons why the exception 
is being sought; and
    ++ How the extraordinary circumstance negatively impacted 
performance on the measure(s) for which an exception is being sought;
     Evidence of the impact of the extraordinary circumstances, 
including but not limited to, photographs, newspaper, and other media 
articles; and
     The request form must be signed by the hospital's CEO or 
designated non-CEO contact and submitted to CMS.
    The same set of information is currently required under the 
Hospital IQR Program and the Hospital VBP Program on the request form 
from a hospital seeking an extraordinary circumstance exception with 
respect to these programs. The specific list of required information 
would be subject to change from time to time at the discretion of CMS.
    Following receipt of the request form, CMS would: (1) Provide a 
written acknowledgement of receipt of the request using the contact 
information provided in the request form to the CEO and any additional 
designated hospital personnel; and (2) provide a formal response to the 
CEO and any additional designated hospital personnel using the contact 
information provided in the request notifying them of our decision. 
Under the proposed policy, we would review each request for an 
extraordinary circumstance exception on a case-by-

[[Page 24498]]

case basis at our discretion. To the extent feasible, we also would 
review such a request in conjunction with any similar requests made 
under other IPPS quality reporting and payment programs, such as the 
Hospital IQR Program and the Hospital VBP Program.
    The proposed policy would not preclude CMS from granting 
extraordinary circumstance exceptions to hospitals that do not request 
them if we determine at our discretion that a disaster or other 
extraordinary circumstance has affected an entire region or locale. If 
CMS makes such a determination to grant an extraordinary circumstance 
exception to hospitals in an affected region or locale, we would convey 
this decision through routine communication channels to hospitals, 
vendors, and QIOs, including, but not limited to, issuing memos, 
emails, and notices on the QualityNet Web site. This provision also 
would align with the Hospital IQR Program's extraordinary circumstances 
extensions or exemptions policy.
    We are inviting public comment on this proposal.

F. Hospital Value-Based Purchasing (VBP) Program: Proposed Policy 
Changes for the FY 2018 Program Year and Subsequent Years

1. Background
a. Statutory Background and Overview of Past Program Years
    Section 1886(o) of the Act, as added by section 3001(a)(1) of the 
Affordable Care Act, requires the Secretary to establish a hospital 
value-based purchasing program (the Hospital VBP Program) under which 
value-based incentive payments are made in a fiscal year to hospitals 
that meet performance standards established for a performance period 
for such fiscal year. Both the performance standards and the 
performance period for a fiscal year are to be established by the 
Secretary.
    For more of the statutory background and descriptions of our 
current policies for the Hospital VBP Program, we refer readers to the 
Hospital Inpatient VBP Program final rule (76 FR 26490 through 26547); 
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51653 through 51660); the 
CY 2012 OPPS/ASC final rule with comment period (76 FR 74527 through 
74547); the FY 2013 IPPS/LTCH PPS final rule (77 FR 53567 through 
53614); the FY 2014 IPPS/LTCH PPS final rule (78 FR 50676 through 
50707); the CY 2014 OPPS/ASC final rule with comment period (78 FR 
75120 through 75121); and the FY 2015 IPPS/LTCH PPS final rule with 
comment period (79 FR 50048 through 50087).
    We have also codified certain requirements for the Hospital VBP 
Program at 42 CFR 412.160 through 412.167.
b. FY 2016 Program Year Payment Details
    Section 1886(o)(7)(B) of the Act instructs the Secretary to reduce 
the base operating DRG payment amount for a hospital for each discharge 
in a fiscal year by an applicable percent. Under section 1886(o)(7)(A) 
of the Act, the sum total of these reductions in a fiscal year must 
equal the total amount available for value-based incentive payments for 
all eligible hospitals for the fiscal year, as estimated by the 
Secretary. We finalized details on how we would implement these 
provisions in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through 
53573) and refer readers to that rule for further details.
    Under section 1886(o)(7)(C)(iv) of the Act, the applicable percent 
for the FY 2016 program year is 1.75 percent. Using the methodology we 
adopted in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53571 through 
53573), we estimate that the total amount available for value-based 
incentive payments for FY 2016 is $1,489,397,095, based on the December 
2014 update of the FY 2014 MedPAR file. We intend to update this 
estimate for the FY 2016 IPPS/LTCH PPS final rule, using the March 2015 
update of the FY 2014 MedPAR file.
    As finalized in the FY 2013 IPPS/LTCH PPS final rule, we will 
utilize a linear exchange function to translate this estimated amount 
available into a value-based incentive payment percentage for each 
hospital, based on its Total Performance Score (TPS) (77 FR 53573 
through 53576). We will then calculate a value-based incentive payment 
adjustment factor that will be applied to the base operating DRG 
payment amount for each discharge occurring in FY 2016, on a per-claim 
basis. We are publishing proxy value-based incentive payment adjustment 
factors in Table 16 of this proposed rule (which is available via the 
Internet on the CMS Web site). The proxy factors are based on the TPSs 
from the FY 2015 program year. These FY 2015 performance scores are the 
most recently available performance scores that hospitals have been 
given the opportunity to review and correct. The slope of the linear 
exchange function used to calculate those proxy value-based incentive 
payment adjustment factors is 2.5797595162. This slope, along with the 
estimated amount available for value-based incentive payments, is also 
published in Table 16.
    We intend to update this table as Table 16A in the final rule 
(which will be available via the Internet on the CMS Web site) to 
reflect changes based on the March 2015 update to the FY 2014 MedPAR 
file. We also intend to update the slope of the linear exchange 
function used to calculate those updated proxy value-based incentive 
payment adjustment factors. The updated proxy value-based incentive 
payment adjustment factors for FY 2016 will continue to be based on 
historic FY 2015 Hospital VBP Program TPSs because hospitals will not 
have been given the opportunity to review and correct their actual TPSs 
for the FY 2016 program year until after the FY 2016 IPPS/LTCH PPS 
final rule is published. After hospitals have been given an opportunity 
to review and correct their actual TPSs for FY 2016, we will add Table 
16B (which will be available via the Internet on the CMS Web site) to 
display the actual value-based incentive payment adjustment factors, 
exchange function slope, and estimated amount available for the FY 2016 
program year. We expect that Table 16B will be posted on the CMS Web 
site in October 2015.
2. Proposed Retention, Removal, Expansion, and Updating of Quality 
Measures for the FY 2018 Program Year
a. Retention of Previously Adopted Hospital VBP Program Measures for 
the FY 2018 Program Year
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53592), we finalized 
our proposal to readopt measures from the prior program year for each 
successive program year, unless proposed and finalized otherwise (for 
example, if we propose and finalize the removal of a measure). We 
stated our belief that this policy would facilitate measure adoption 
for the Hospital VBP Program for future program years, as well as align 
the Hospital VBP Program with the Hospital IQR Program (77 FR 53592). 
We are not proposing to change our current policy of readopting 
measures from the prior program year for each successive program year.
b. Proposed Removal of Two Measures
    One consideration in determining whether a measure should be 
retained or removed from the program is based on an analysis of whether 
the measure is ``topped-out.'' We have adopted two criteria for 
determining the ``topped-out'' status of Hospital VBP measures:
     Statistically indistinguishable performance at the 75th 
and 90th percentiles; and
     Truncated coefficient of variation <=0.10.

[[Page 24499]]

    In this proposed rule, we are proposing to remove the IMM-2 
Influenza Immunization and AMI-7a Fibrinolytic Therapy Received within 
30 Minutes of Hospital Arrival measures, effective for the FY 2018 
program year. We believe that removing these measures will continue to 
ensure that we make valid statistical comparisons through our finalized 
scoring methodology, while reducing the reporting burden on 
participating hospitals.
(1) Proposed Removal of IMM-2 Influenza Immunization Measure
    Based on our evaluation of the most recently available data, we 
believe that IMM-2 is ``topped-out.'' As we have discussed in prior 
rulemaking, measuring hospital performance on ``topped-out'' measures 
will have no meaningful effect on a hospital's TPS, given that 
performance on ``topped-out'' measures is generally so high and 
unvarying that meaningful distinctions and improvements in performance 
can no longer be made.
    As discussed further in section VIII.A.3.b. of the preamble of this 
proposed rule, we believe that this measure should continue to be part 
of the Hospital IQR Program measure set because it is the only measure 
that addresses the Best Practices to Enable Healthy Living goal in the 
CMS Quality Strategy and priority of the same name in the National 
Quality Strategy.
    We are inviting public comment on this proposal.
(2) Proposed Removal of AMI-7a Fibrinolytic Therapy Received Within 30 
Minutes of Hospital Arrival Measure
    Our evaluation of the most recently available data shows that AMI-
7a is not widely reported by hospitals, and that many hospitals have 
less than the minimum number of cases required for reporting because 
most acute myocardial infarction patients receive percutaneous coronary 
intervention instead of fibrinolytic therapy. We are proposing to 
remove AMI-7a because collection of the measure data is burdensome to 
hospitals and measure data are infrequently reported. Therefore, we do 
not believe that its continued adoption under the Hospital VBP Program 
will advance our quality improvement goals. As discussed in section 
VIII.A.3.b. of the preamble of this proposed rule, we also are 
proposing to remove this measure under the Hospital IQR Program.
    We are inviting public comment on this proposal.
c. Proposed New Measure for the FY 2018 Program Year: 3-Item Care 
Transition Measure (CTM-3) (NQF #0228)
    We consider measures for adoption based on the statutory 
requirements, including specification under the Hospital IQR Program, 
posting dates on the Hospital Compare Web site, and our priorities for 
quality improvement as outlined in the CMS Quality Strategy, available 
at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/CMS-Quality-Strategy.pdf.
    The 3-Item Care Transition Measure (CTM-3) is an NQF-endorsed 
measure. We adopted this measure in the Hospital IQR Program in the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53513 through 53516). Initial 
measure data were posted on Hospital Compare in December 2014 and the 
full measure specifications are available at: http://www.caretransitions.org/documents/CTM3Specs0807.pdf. Specifications for 
the Care Transition Measure as used in the HCAHPS Survey can be found 
in the current HCAHPS Quality Assurance Guidelines, http://www.hcahpsonline.org/qaguidelines.aspx.
    The CTM-3 measure adds three questions to the HCAHPS Survey, as 
follows:

 During this hospital stay, staff took my preferences and those 
of my family or caregiver into account in deciding what my health care 
needs would be when I left.
    [ballot] Strongly disagree
    [ballot] Disagree
    [ballot] Agree
    [ballot] Strongly agree
 When I left the hospital, I had a good understanding of the 
things I was responsible for in managing my health.
    [ballot] Strongly disagree
    [ballot] Disagree
    [ballot] Agree
    [ballot] Strongly agree
 When I left the hospital, I clearly understood the purpose for 
taking each of my medications.
    [ballot] Strongly disagree
    [ballot] Disagree
    [ballot] Agree
    [ballot] Strongly agree
    [ballot] I was not given any medication when I left the hospital

    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50065 through 
50066), we stated that we were considering proposing to add the CTM-3 
measure from the HCAHPS Survey to the Patient and Caregiver Centered 
Experience of Care/Care Coordination (PCCEC/CC) domain of the FY 2018 
Hospital VBP Program, and we sought public comments on this topic. We 
specifically sought public comments on how the new CTM-3 dimension 
should be included in the scoring methodology that we have adopted for 
the PCCEC/CC domain.
    Based on other public comments last year, we agreed to release 
additional information about the validity, reliability, and statistical 
properties of the CTM-3 measure when we proposed the measure (79 FR 
50066). We made this information publicly available in 2014 through the 
NQF reendorsement process of the HCAHPS Survey (NQF #0166), available 
at: http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73867.
    We note that the MAP supported the inclusion of the CTM-3 measure 
in the Hospital VBP Program in its MAP Pre-Rulemaking Report: 2013 
Recommendations on Measures Under Consideration by HHS, available at: 
http://www.qualityforum.org/Publications/2013/02/MAP_Pre-Rulemaking_Report_-_February_2013.aspx. The MAP noted that the addition 
of the CTM-3 measure will fill a gap in measuring care transitions.
    We are proposing this measure for the Hospital VBP Program based on 
the MAP recommendation, our adoption of the measure in the Hospital IQR 
Program and our posting of measure data on Hospital Compare for at 
least one year before the beginning of the performance period for that 
measure. We believe that the proposed addition of the CTM-3 measure to 
the Hospital VBP Program meets the statutory requirements for inclusion 
in the FY 2018 program year. Finally, we also believe that this 
measure, in conjunction with the HCAHPS survey, assesses an important 
component of quality in the acute care inpatient hospital setting. 
However, we emphasize that HCAHPS scores are designed and intended for 
use at the hospital level. We do not endorse the use of HCAHPS scores 
for comparisons within hospitals, such as comparison of HCAHPS scores 
associated with a particular ward, floor, provider, or nursing staff. 
Further, the pain domain questions are intended to evaluate patients' 
experience of their pain management. HCAHPS pain domain results are not 
designed to judge, or compare, appropriate versus inappropriate 
provider prescribing behavior.
    We are inviting public comment on this proposal.

[[Page 24500]]

d. Proposed Removal of Clinical Care--Process Subdomain for the FY 2018 
Program Year and Subsequent Years
    We have previously adopted three measures for the Clinical Care--
Process subdomain for the FY 2017 Hospital VBP Program (for example, 79 
FR 50062 (Table on Previously Adopted and New Measures for the FY 2017 
Hospital VBP Program)). However, as discussed above, we are proposing 
to remove the AMI-7a and IMM-2 measures from the Hospital VBP Program, 
and we are not proposing to adopt any additional measures for the 
Clinical Care--Process subdomain. If the proposals above are finalized, 
only one measure, PC-01 Elective Delivery, which measures the incidence 
of elective births prior to 39 weeks gestation, would remain in the 
Clinical Care--Process subdomain for the FY 2018 program year. For the 
reasons outlined below, and if we finalize the removal of the IMM-2 and 
AMI-7a measures, we are proposing to move PC-01 to the Safety domain 
and to remove the Clinical Care--Process subdomain beginning with the 
FY 2018 program year.
    As we have stated over the past several years (for example, 79 FR 
50084), we desire the Hospital VBP Program to be as inclusive as 
possible while maintaining and ensuring the reliability of the domains. 
We believe that the PC-01 Elective Delivery measure continues to be 
appropriate for the Hospital VBP Program because, in 2012, nearly one 
million Medicare beneficiaries were women age 45 and under.\54\ 
Further, in 2011, Medicare paid for roughly 14,000 births (79 FR 
50060). However, not all hospitals provide maternity services, which 
would leave these hospitals with no Clinical Care-Process subdomain 
measures to report in FY 2018 if PC-01 remains the only measure in that 
subdomain.
---------------------------------------------------------------------------

    \54\ Centers for Medicare & Medicaid Services. (2013). Table 
I.3--Medicare Enrollment/Demographics. Available at: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/CMS-Statistics-Reference-Booklet/Downloads/CMS_Stats_2013_final.pdf.
---------------------------------------------------------------------------

    We believe that the PC-01 Elective Delivery measure, currently in 
the Clinical Care--Process subdomain, can appropriately be 
recategorized as a Safety domain measure. PC-01 addresses a process 
designed to reduce risk to both the neonate and the mother, thereby 
making care safer. Guidelines from the American College of 
Obstetricians and Gynecologists and the American Academy of Pediatrics 
state elective deliveries should not be performed at <39 weeks 
gestation unless medically indicated.\55\ Evidence has shown that 
early-term deliveries result in significant short-term neonatal 
mortality and result in more cesarean deliveries, and longer maternal 
length of stay.\56\ Furthermore, the MAP Hospital Workgroup has 
included PC-01 as an ``obstetrical adverse event'' measure in its 
Safety family of measures.\57\ As we continue to align our measure 
categorizations more closely with the CMS Quality Strategy, we are 
proposing to recategorize PC-01 as a Safety measure in the Safety 
domain, and for the reasons discussed above, to remove the Clinical 
Care--Process subdomain beginning with the FY 2018 program year.
---------------------------------------------------------------------------

    \55\ Clark, S., Miller, D., Belfort, M., Dildy, G., Frye, D., & 
Meyers, J. (2009). Neonatal and maternal outcomes associated with 
elective delivery. [Electronic Version]. Am J Obstet Gynecol. 
200:156.e1-156.e4.
    \56\ Glantz, J. (Apr. 2005). Elective induction vs. spontaneous 
labor associations and outcomes. [Electronic Version]. J Reprod Med. 
50(4):235-40. Available at: http://www.researchgate.net/publication/7826004_Elective_induction_vs._spontaneous_labor_associations_and_outcomes.
    \57\ MAP Families of Measures: Safety, Care Coordination, 
Cardiovascular Conditions, Diabetes Final Report, October 2012, p. 
46.
---------------------------------------------------------------------------

    Finally, if we finalize our proposal to remove the Clinical Care--
Process subdomain, we are proposing to rename the Clinical Care--
Outcomes subdomain as simply the Clinical Care domain. We are also 
proposing to reweight the domains to reflect our proposals, which we 
detail in section IV.G.7.a. of the preamble of this proposed rule.
    We are inviting public comments on these proposals.
e. NHSN Measures Standard Population Data
    The NHSN measures are calculated by CDC, and currently include the 
CAUTI, CLABSI, MRSA bacteremia, CDI, and Colon and Abdominal 
Hysterectomy SSI measures in the FY 2017 program year and subsequent 
program years. They measure the occurrence of these HAIs in hospitals 
participating in the Hospital VBP Program. In order to calculate the 
NHSN measures for use in both the Hospital IQR Program and the Hospital 
VBP Program, CDC must go through several steps. First, CDC determines 
each NHSN measure's number of predicted infections.\58\ CDC determines 
the number of predicted infections using both specific patient care 
location characteristics (for example, number of days in which a 
patient in an ICU has a central line) and infection rates that occurred 
among a standard population (sometimes referred to by CDC as ``national 
baseline'' but referred to here as ``standard population data'').\59\ 
Finally, for each NHSN measure, CDC calculates the Standardized 
Infection Ratio (SIR) by comparing a hospital's observed number of HAIs 
with the number of HAIs predicted for the hospital, adjusting for 
several risk factors.\60\ For more information about the way NHSN 
measures are calculated, we refer readers to QualityNet's Web page on 
HAI measures, which may be found at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228760487021.
---------------------------------------------------------------------------

    \58\ Available at: http://www.cdc.gov/HAI/surveillance/QA_stateSummary.html.
    \59\ Available at: http://www.cdc.gov/HAI/surveillance/QA_stateSummary.html.
    \60\ Available at: http://www.cdc.gov/nhsn/PDFs/Newsletters/NHSN_NL_OCT_2010SE_final.pdf.
---------------------------------------------------------------------------

    As part of routine measure maintenance, CDC is updating the 
``standard population data'' to ensure the NHSN measures' number of 
predicted infections reflect the current state of HAIs in the United 
States.\61\ Currently, CDC calculates the ``standard population data'' 
for the CAUTI measure based on data it collected in CY 2009.\62\ CDC 
calculates the ``standard population data'' for the CLABSI and Colon 
and Abdominal Hysterectomy SSI measures based on data it collected in 
2006 to 2008.\63\ CDC calculates the ``standard population data'' for 
the MRSA bacteremia and CDI measures based on data it collected in 2010 
to 2011.\64\ Beginning in 2015, CDC will collect data in order to 
update the standard population data for all of these NHSN measures (the 
CY 2015 standard population data for HAI measures will hereinafter be 
referred to as ``new standard population data'').
---------------------------------------------------------------------------

    \61\ Available at: http://www.cdc.gov/nhsn/PDFs/Newsletters/NHSN_NL_OCT_2010SE_final.pdf.
    \62\ Available at: http://www.cdc.gov/HAI/surveillance/QA_stateSummary.html#b6.
    \63\ Available at: http://www.cdc.gov/HAI/surveillance/QA_stateSummary.html#b6.
    \64\ Available at: http://www.cdc.gov/HAI/surveillance/QA_stateSummary.html#b6.
---------------------------------------------------------------------------

    Because the Hospital VBP Program calculates improvement points 
using comparisons between data collected from hospitals in a baseline 
period and data collected in a performance period, the Hospital VBP 
Program must treat CDC's standard population data update differently 
than other quality programs. We have determined that we cannot equally 
compare CDC's ``new standard population data'' to the ``current 
standard population data'' in order to calculate improvement points. If 
we do not address the CDC's measure update, we will be unable to 
compare the baseline and performance periods for NHSN measures in the 
FY 2017 and FY 2018 program years. To address the

[[Page 24501]]

problem, we intend to use the ``current standard population data'' to 
calculate performance standards and calculate and publicly report 
measure scores until the FY 2019 program year, as depicted in the table 
below. For the FY 2019 program year and subsequent years, the Hospital 
VBP Program will use the ``new standard population data'' to calculate 
performance standards and calculate and publicly report measure scores.

                           CDC's Standard Population Data in the Hospital VBP Program
----------------------------------------------------------------------------------------------------------------
                                    FY 2017 program     FY 2018 program     FY 2019 program     FY 2020 program
                                        year *              year *              year **             year **
----------------------------------------------------------------------------------------------------------------
NHSN Measures Baseline Periods..  Current standard    Current standard    New standard        New standard
                                   population data.    population data.    population data.    population data.
NHSN Measures Performance         Current standard    Current standard    New standard        New standard
 Periods.                          population data.    population data.    population data.    population data.
----------------------------------------------------------------------------------------------------------------
* CDC will use ``current standard population data'' to calculate measure data that we will translate into scores
  on the measures.
** CDC will use ``new standard population data'' (CY 2015) to calculate measure data that we will translate into
  scores on the measures.

    For a discussion addressing the ``new standard population data'' in 
the Hospital IQR Program, we refer readers to section VIII.A.4.b. of 
the preamble of this proposed rule.
f. Summary of Previously Adopted and Newly Proposed Measures for the FY 
2018 Program Year
    In summary, for the FY 2018 program, we are proposing the following 
measure set:

                             FY 2018 Previously Adopted and Newly Proposed Measures
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
                   Patient and Caregiver-Centered Experience of Care/Care Coordination Domain
----------------------------------------------------------------------------------------------------------------
HCAHPS......................................  Hospital Consumer Assessment of Healthcare Providers and Systems
                                               Survey.
CTM-3 *.....................................  3-Item Care Transitions Measure.
----------------------------------------------------------------------------------------------------------------
                                              Clinical Care Domain
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI.................................  Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate
                                               Following Acute Myocardial Infarction Hospitalization.
MORT-30-HF..................................  Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate
                                               Following Heart Failure Hospitalization.
MORT-30-PN..................................  Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate
                                               Following Pneumonia Hospitalization.
----------------------------------------------------------------------------------------------------------------
                                                  Safety Domain
----------------------------------------------------------------------------------------------------------------
CAUTI.......................................  National Healthcare Safety Network Catheter-Associated Urinary
                                               Tract Infection Outcome Measure.
CLABSI......................................  National Healthcare Safety Network Central Line-Associated
                                               Bloodstream Infection Outcome Measure.
Colon and Abdominal Hysterectomy SSI........  Centers for Disease Control and Prevention Harmonized Procedure
                                               Specific Surgical Site Infection Outcome Measure:
                                               Colon
                                               Abdominal Hysterectomy.
MRSA bacteremia.............................  National Healthcare Safety Network Facility-Wide Inpatient
                                               Hospital-Onset Methicillin-Resistant Staphylococcus aureus
                                               Bacteremia Outcome Measure.
CDI.........................................  National Healthcare Safety Network Facility-Wide Inpatient
                                               Hospital-Onset Clostridium difficile Infection Outcome Measure.
PSI-90......................................  Patient Safety for Selected Indicators (Composite).
PC-01 **....................................  Elective Delivery.
----------------------------------------------------------------------------------------------------------------
                                      Efficiency and Cost Reduction Domain
----------------------------------------------------------------------------------------------------------------
MSPB-1......................................  Payment-Standardized Medicare Spending Per Beneficiary
----------------------------------------------------------------------------------------------------------------
* Proposed new measure.
** Proposed to be moved from the Clinical Care--Process subdomain to the Safety domain.

3. Previously Adopted and Newly Proposed Measures for the FY 2019, FY 
2021, and Subsequent Program Years
    Due to the time necessary to adopt measures, we often adopt 
policies for the Hospital VBP Program well in advance of the program 
year for which they will be applicable (for example, 76 FR 26490 
through 26547; 76 FR 51653 through 51660; 76 FR 74527 through 74547; 77 
FR 53567 through 53614; 78 FR 50676 through 50707; 78 FR 75120 through 
75121; 79 FR 50048 through 50087). Below, we are signaling our intent 
to include additional data in certain NHSN measures beginning with the 
FY 2019 program year, proposing to adopt a new measure beginning with 
the FY 2021 program year, and summarizing all previously adopted and 
newly proposed measures.
a. Intent To Propose in Future Rulemaking To Include Selected Ward 
(Non-Intensive Care Unit (ICU)) Locations in Certain NHSN Measures 
Beginning With the FY 2019 Program Year
    The Hospital VBP Program uses adult, pediatric, and neonatal 
intensive care unit (ICU) data to calculate performance standards and 
measure scores for the CAUTI and CLABSI measures for the FY 2017 and FY 
2018 program years (79 FY

[[Page 24502]]

50061). In the FY 2014 IPPS/LTCH PPS proposed rule, we proposed under 
the Hospital IQR Program to expand the collection of CAUTI and CLABSI 
measures to include several selected ward (non-ICU) locations beginning 
with events occurring on or after January 1, 2014 (78 FR 27684). In the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50787), after consideration of 
the public comments received, we deferred the implementation date of 
the CAUTI and CLABSI measure expansion to selected ward (non-ICU) 
settings for the Hospital IQR Program from January 1, 2014 to January 
1, 2015 (78 FR 50787). Selected ward (non-ICU) locations are defined as 
adult or pediatric medical, surgical, and medical/surgical wards (79 FY 
50061; 78 FR 50787).
    In the FY 2015 IPPS/LTCH PPS final rule, we signaled our intent to 
consider using data from selected ward (non-ICU) locations for the 
Hospital VBP Program, beginning in the FY 2019 program year for 
purposes of calculating performance standards for the CAUTI and CLABSI 
measures (79 FR 50061). We intend to propose to include the selected 
ward (non-ICU) locations in the CAUTI and CLABSI measures beginning 
with the FY 2019 program year in future rulemaking. We intend to 
propose to adopt a baseline period of January 1, 2015 through December 
31, 2015, and a performance period of January 1, 2017 through December 
31, 2017, for the CAUTI and CLABSI measures. This expansion of the 
CAUTI and CLABSI measures would be consistent with the NQF 
reendorsement update to these measures, which allows application of the 
measures beyond ICUs (78 FR 50787). We believe this expansion of the 
measures will allow hospitals that do not have ICU locations to use the 
tools and resources of the NHSN for quality improvement and public 
reporting efforts (78 FR 50787).
    We are inviting public comment on this plan to accommodate these 
measures' expansions in the Hospital VBP Program future rulemaking.
b. Proposed New Measure for the FY 2021 Program Year: Hospital 30-Day, 
All-Cause, Risk-Standardized Mortality Rate Following Chronic 
Obstructive Pulmonary Disease (COPD) Hospitalization (NQF #1893)
    Hospital 30-Day, All-Cause, RSMR following COPD Hospitalization 
(NQF #1893) (MORT-30-COPD) is a risk-adjusted, NQF-endorsed mortality 
measure monitoring mortality rates following COPD hospitalizations. We 
adopted this measure in the Hospital IQR Program in the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50792). Initial measure data were posted on 
Hospital Compare in December 2014 and the full measure specifications 
are available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    Chronic lower respiratory disease (including COPD) is the third 
leading cause of death in the United States.\65\ Between 1998 and 2008, 
the number of patients hospitalized annually for acute exacerbations of 
COPD increased by approximately 18 percent.66 67 68 
Moreover, COPD is one of the top 20 conditions contributing to Medicare 
costs.\69\ The median 30-day RSMR following admissions for COPD between 
July 2010 and June 2013 was 7.8 percent with variation in mortality 
rates ranging from 5.5 percent to 12.4 percent across over 2,700 
hospitals.\70\
---------------------------------------------------------------------------

    \65\ Hoyert DL, Xu JQ. Deaths: preliminary data for 2011. Natl 
Vital Stat Rep. 2012;61(6):1-65. Hyattsville, MD: National Center 
for Health Statistics.2012. Available at: http://www.birthbythenumbers.org/wp-content/uploads/2012/12/prelim-deaths-2011.pdf.
    \66\ National Heart L, and Blood Institute, The Morbidity & 
Mortality: Chart Book on Cardiovascular, Lung and Blood Diseases. 
2009; Available at: http://www.nhlbi.nih.gov/resources/docs/2009_ChartBook.pdf.
    \67\ The Centers for Disease Control and Prevention. National 
Center for Health Statistics Chronic Lower Respiratory Disease. 
FastStats 2010; Available at: http://www.cdc.gov/nchs/fastats/copd.htm.
    \68\ Agency for Healthcare Research and Quality. Healthcare Cost 
and Utilization Project Statistics on Hospitals Stays. 2009; 
Available at: http://hcupnet.ahrq.gov/.
    \69\ Andrews RM. The National Hospital Bill: The Most Expensive 
Conditions by Payer, 2006. Rockville: Agency for Healthcare Research 
and Quality; 2008.
    \70\ September 2014 Medicare Hospital Quality Chartbook 
Performance Report on Outcome Measures. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/Medicare-Hospital-Quality-Chartbook-2014.pdf.
---------------------------------------------------------------------------

    The MAP supported the inclusion of the MORT-30-COPD measure in the 
Hospital VBP Program as detailed in the ``Spreadsheet of MAP 2015 Final 
Recommendations.'' \71\ The MAP noted that the addition of the MORT-30-
COPD measure would be appropriate as 30-day mortality rate measures for 
AMI, HF, and PN are already part of the Hospital VBP Program measure 
set.
---------------------------------------------------------------------------

    \71\ National Quality Forum ``Spreadsheet of MAP 2015 Final 
Recommendations'' available at: http://www.qualityforum.org/map/ and 
``Process and Approach for MAP Pre-Rulemaking Deliberations 2015'' 
found at http://www.qualityforum.org/Publications/2015/01/Process_and_Approach_for_MAP_Pre-Rulemaking_Deliberations_2015.aspx.
---------------------------------------------------------------------------

    We are proposing this measure for the Hospital VBP Program based on 
the MAP recommendation, our adoption of the measure in the Hospital IQR 
Program and our posting of measure data on Hospital Compare for at 
least 1 year prior to the start of the performance period. In addition, 
the MORT-30-COPD measure is appropriate for the Hospital VBP Program 
because it addresses a high volume, high cost condition, and chronic 
lower respiratory disease (including COPD) is the third leading cause 
of mortality in the United States. The measure aligns with the CMS 
Quality Strategy Goal of Effective Prevention and Treatment. Based on 
the continued high risk of mortality after COPD hospitalizations, we 
are proposing to add it to the Clinical Care domain for the FY 2021 
Hospital VBP Program.
    We are inviting public comment on this proposal.
c. Summary of Previously Adopted and Newly Proposed Measures for the FY 
2019 and FY 2021 and Subsequent Program Years
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50063), we finalized 
our proposal to adopt the Hospital-Level Risk-Standardized Complication 
Rate Following Elective Primary THA/TKA measures for the FY 2019 
program year and subsequent years. In the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50063 through 50065), we also finalized our proposal to 
adopt the PSI-90 measure for the FY 2019 program year and subsequent 
years.

                   FY 2019 Previously Adopted Measures
------------------------------------------------------------------------
                                               Clinical Care Domain
------------------------------------------------------------------------
THA/TKA................................  Hospital-Level Risk-
                                          Standardized Complication Rate
                                          Following Elective Primary
                                          Total Hip Arthroplasty/Total
                                          Knee Arthroplasty.
------------------------------------------------------------------------


                   FY 2019 Previously Adopted Measures
------------------------------------------------------------------------
                                                  Safety Domain
------------------------------------------------------------------------
PSI-90.................................  Patient Safety For Selected
                                          Indicators (Composite).
------------------------------------------------------------------------

    In this proposed rule, we are proposing to adopt the MORT-30-COPD 
measure for the FY 2021 program year and subsequent years.

[[Page 24503]]



                     FY 2021 Newly Proposed Measure
------------------------------------------------------------------------
                                               Clinical Care Domain
------------------------------------------------------------------------
MORT-30-COPD...........................  Hospital 30-Day, All-Cause,
                                          Risk-Standardized Mortality
                                          Rate Following Chronic
                                          Obstructive Pulmonary Disease
                                          Hospitalization.
------------------------------------------------------------------------

4. Possible Measure Topics for Future Program Years
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50066 through 
50070), we sought comment on measures that could potentially be used to 
expand the Efficiency and Cost Reduction domain in the future. We are 
again seeking comments on this issue. We are interested in expanding 
the Efficiency and Cost Reduction domain to include a more robust 
measure set, which may include measures that supplement the MSPB 
measure with more condition and/or treatment specific episode measures. 
We encourage comment on efficiency and cost reduction measures already 
included in the Hospital IQR Program as well as measures we are 
proposing in section VIII.A.7. of the preamble of this proposed rule 
for inclusion in the Hospital IQR Program beginning with the FY 2018 
payment determination.
5. Previously Adopted and Newly Proposed Baseline and Performance 
Periods for the FY 2018 Program Year
a. Background
    Section 1886(o)(4) of the Act requires the Secretary to establish a 
performance period for the Hospital VBP Program that begins and ends 
prior to the beginning of such fiscal year. We refer readers to the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50048 through 50087) for the 
baseline and performance periods for the Clinical Care--Process, PCCEC/
CC, Clinical Care--Outcomes, and Efficiency and Cost Reduction domains 
that we have adopted for the FY 2017 program year.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50692 through 50694, 
we adopted baseline and performance periods for the 30-day mortality 
measures for FY 2017, FY 2018, and FY 2019, and for the PSI-90 measure 
for FY 2017 and FY 2018 (78 FR 50692 through 50694, 50698 through 
50699).
b. Proposed Baseline and Performance Periods for the Patient and 
Caregiver-Centered Experience of Care/Care Coordination Domain for the 
FY 2018 Program Year
    Since the FY 2015 program year, we have adopted a 12-month baseline 
period and 12-month performance period for measures in the PCCEC/CC 
domain (77 FR 53598; 78 FR 50692; 79 FR 50072). We continue to believe 
that a 12-month performance period for the HCAHPS Survey and proposed 
CTM-3 measure provides us sufficient data on which to score hospital 
performance, which is an important goal for both CMS and stakeholders. 
Therefore, for the FY 2018 program year, we are proposing to adopt a 
12-month performance period of January 1, 2016 through December 31, 
2016 for the PCCEC/CC domain. We also are proposing to adopt a 
corresponding 12-month baseline period of January 1, 2014 through 
December 31, 2014 for purposes of calculating improvement points and 
calculating performance standards.
    We are inviting public comment on these proposals.
c. Proposed Baseline and Performance Periods for NHSN Measures and PC-
01 in the Safety Domain for the FY 2018 Program Year
    Since the FY 2016 program year, we have adopted a 12-month baseline 
period and 12-month performance period for NHSN measures (78 FR 75121; 
79 FR 50071). In addition, we adopted the PC-01 measure for the FY 2017 
program year with a 12-month baseline period and 12-month performance 
period (79 FR 50072). We continue to believe that a 12-month 
performance period provides us with sufficient data on which to score 
hospital performance on the NHSN measures, as well as the PC-01 
measure, in the Safety domain. We also note that 12-month baseline and 
performance periods are consistent with the reporting periods used for 
these measures under the Hospital IQR Program. Therefore, for the FY 
2018 program year, we are proposing to adopt a performance period of 
January 1, 2016 through December 31, 2016 for the NHSN measures and the 
PC-01 measure in the Safety domain. We also are proposing to adopt a 
corresponding baseline period of January 1, 2014 through December 31, 
2014 for purposes of calculating improvement points and calculating 
performance standards.
    We are inviting public comment on these proposals.
d. Proposed Baseline and Performance Periods for the Efficiency and 
Cost Reduction Domain for the FY 2018 Program Year
    Since the FY 2016 program year, we have adopted a 12-month baseline 
period and 12-month performance period for the MSPB-1 measure in the 
Efficiency and Cost Reduction domain (79 FR 50072; 78 FR 50692). These 
baseline and performance periods enable us to collect sufficient 
measure data, while allowing time to calculate and incorporate MSPB-1 
measure data into the Hospital VBP Program scores in a timely manner. 
Therefore, for the FY 2018 program year, we are proposing to adopt a 
12-month performance period of January 1, 2016 through December 31, 
2016 for the MSPB-1 measure in the Efficiency and Cost Reduction 
domain. We also are proposing to adopt a corresponding baseline period 
of January 1, 2014 through December 31, 2014. We note that these 
proposed baseline and performance periods align with the baseline and 
performance periods for the PCCEC/CC domain and all measures in the 
Safety domain with the exception of PSI-90.
    We are inviting public comments on these proposals.
e. Summary of Previously Adopted and Newly Proposed Baseline and 
Performance Periods for the FY 2018 Program Year
    The table below summarizes the proposed baseline and performance 
periods for the FY 2018 program year (with previously adopted baseline 
and performance periods for the mortality and PSI composite (PSI-90) 
measures noted). We note that we have proposed above to remove the 
Clinical Care--Process subdomain from the Hospital VBP Program 
beginning with the FY 2018 program year. We note further that these 
baseline and performance periods would continue to align with the 
PCCEC/CC domain and the Efficiency and Cost Reduction domain, as well 
as the periods proposed for certain measures in the Safety domain.

Previously Adopted and Proposed Baseline and Performance Periods for the
                          FY 2018 Program Year
------------------------------------------------------------------------
             Domain                Baseline period    Performance period
------------------------------------------------------------------------
PCCEC/CC:
     HCAHPS Survey.....  January 1, 2014-     January 1, 2016-
                                  December 31, 2014.   December 31,
                                                       2016.
     CTM-3.............

[[Page 24504]]

 
Clinical Care:
    Mortality (MORT-30-AMI,      October 1, 2009-     October 1, 2013-
     MORT-30-HF, MORT-30-PN) *.   June 30, 2012.       June 30, 2016.
Safety:
     PSI-90 *..........   July 1,      July 1,
                                  2010-June 30, 2012.  2014-June 30,
                                                       2016.
     PC-01 and NHSN       January 1,   January
     measures (CAUTI, CLABSI,     2014-December 31,    1, 2016-December
     SSI, CDI, MRSA).             2014.                31, 2016.
Efficiency and Cost Reduction:
    MSPB-1.....................  January 1, 2014-     January 1, 2016-
                                  December 31, 2014.   December 31,
                                                       2016.
------------------------------------------------------------------------
* Previously adopted baseline and performance periods.

6. Previously Adopted and Newly Proposed Baseline and Performance 
Periods for Future Program Years
a. Previously Adopted Baseline and Performance Periods for the FY 2019 
Program Year
    The table below summarizes the previously adopted baseline and 
performance periods for the Clinical Care domain and PSI-90 measures 
for the FY 2019 program year.

   Previously Adopted Baseline and Performance Periods for the FY 2019
                              Program Year
------------------------------------------------------------------------
             Domain                Baseline period    Performance period
------------------------------------------------------------------------
Clinical Care:
    Mortality (MORT-30-AMI,       July 1,      July 1,
     MORT-30-HF, MORT-30-PN).     2009-June 30, 2012.  2014-June 30,
                                                       2017.
     THA/TKA...........   July 1,      July 1,
                                  2010-June 30, 2013.  2015-June 30,
                                                       2017.
Safety:
     PSI-90............   July 1,      July 1,
                                  2011-June 30, 2013.  2015-June 30,
                                                       2017.
------------------------------------------------------------------------

b. Proposed Baseline and Performance Periods for the PSI-90 Measure in 
the Safety Domain in the FY 2020 Program Year
    The table below summarizes the previously adopted and proposed 
baseline and performance periods for the FY 2020 program year. In the 
FY 2020 program year, we are proposing to adopt a performance period of 
July 1, 2016 to June 30, 2018 for the PSI-90 measure. We are proposing 
a corresponding baseline period of July 1, 2012 to June 30, 2014. This 
will allow us to collect 24-months of data from hospitals on the PSI-90 
measure.
    We are inviting comment on these proposals.

 Previously Adopted and Newly Proposed Baseline and Performance Periods
                      for the FY 2020 Program Year
------------------------------------------------------------------------
             Domain                Baseline period    Performance period
------------------------------------------------------------------------
Clinical Care:
     Mortality (MORT-30- July 1, 2010-June    July 1, 2015-June
     AMI, MORT-30-HF, MORT-30-    30, 2013.            30, 2018.
     PN) *.
     THA/TKA *.........
Safety:
    PSI (PSI-90) Measure.......  July 1, 2012-June    July 1, 2016-June
                                  30, 2014.            30, 2018.
------------------------------------------------------------------------
* Previously adopted baseline and performance periods.

c. Proposed Baseline and Performance Periods for the Clinical Care 
Domain for the FY 2021 Program Year
    The table below summarizes the proposed baseline and performance 
periods for the FY 2021 program year. In the FY 2014 IPPS/LTCH PPS and 
FY 2015 IPPS/LTCH PPS final rules (78 FR 50692 through 50694; 79 FR 
50072 through 50073), we adopted baseline and performance periods for 
the three 30-day mortality measures for the FY 2017, FY 2018, FY 2019, 
and FY 2020 program years. We adopted baseline and performance periods 
for the THA/TKA measure for the FY 2019 and FY 2020 program years (79 
FR 50073). We adopted this policy in light of the length of the 
performance period that is needed to collect enough measure data for 
reliable performance scoring. We continue to believe that we should 
adopt 36-month baseline and performance periods for the mortality 
measures when possible to accommodate those durations.
    We believe that a similar rationale applies to the new MORT-30-COPD 
measure that we are proposing to adopt for the Clinical Care domain for 
the FY

[[Page 24505]]

2021 program year. Furthermore, we are attempting to align measurement 
periods under the Hospital VBP Program with measurement periods under 
the Hospital IQR Program for the 30-day mortality measures. Therefore, 
for the FY 2021 program year, we are proposing to adopt a 36-month 
performance period of July 1, 2016 through June 30, 2019 for all 
mortality measures (the three previously adopted mortality measures, as 
well as the proposed MORT-30-COPD measure) in the Clinical Care domain. 
We also are proposing to adopt a corresponding baseline period of July 
1, 2011 through June 30, 2014. We note that the proposed performance 
periods will align with the reporting periods for the mortality 
measures in the Hospital IQR Program for the first time.
    For the THA/TKA measure in the FY 2021 program year, we are 
proposing to adopt a 36-month performance period of April 1, 2016 
through March 31, 2019. We also are proposing to adopt a corresponding 
baseline period of April 1, 2011 through March 31, 2014. This baseline 
and performance period will align with the THA/TKA measure reporting 
period for the Hospital IQR Program and will make reporting more 
seamless for hospitals.
    We are inviting public comment on these proposals.

 Proposed Baseline and Performance Periods for the FY 2021 Program Year
------------------------------------------------------------------------
             Domain                Baseline period    Performance period
------------------------------------------------------------------------
Clinical Care:
     Mortality (MORT-30-  July 1,      July 1,
     AMI, MORT-30-HF, MORT-30-    2011-June 30, 2014.  2016-June 30,
     PN, MORT-30-COPD).                                2019.
     THA/TKA...........   April 1,     April 1,
                                  2011-March 31,       2016-March 31,
                                  2014.                2019.
------------------------------------------------------------------------

7. Proposed Performance Standards for the Hospital VBP Program
a. Background
    Section 1886(o)(3)(A) of the Act requires the Secretary to 
establish performance standards for the measures selected under the 
Hospital VBP Program for a performance period for the applicable fiscal 
year. The performance standards must include levels of achievement and 
improvement, as required by section 1886(o)(3)(B) of the Act, and must 
be established not later than 60 days before the beginning of the 
performance period for the fiscal year involved, as required by section 
1886(o)(3)(C) of the Act. We refer readers to the Hospital Inpatient 
VBP Program final rule (76 FR 26511 through 26513) for further 
discussion of achievement and improvement standards under the Hospital 
VBP Program.
    In addition, when establishing the performance standards, section 
1886(o)(3)(D) of the Act requires the Secretary to consider appropriate 
factors, such as: (1) Practical experience with the measures, including 
whether a significant proportion of hospitals failed to meet the 
performance standard during previous performance periods; (2) 
historical performance standards; (3) improvement rates; and (4) the 
opportunity for continued improvement.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53599 through 
53604), we adopted performance standards for the FY 2015 program year 
and certain FY 2016 program year measures. We also finalized our policy 
to update performance standards for future program years via notice on 
the CMS Web site or another publicly available Web site. In the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50694 through 50698), we revised our 
regulatory definitions of ``achievement threshold'' and ``benchmark'' 
at 42 CFR 412.160 and adopted performance standards for additional FY 
2016 program year measures. We also adopted an interpretation of 
``achievement threshold'' and ``benchmark'' under 42 CFR 412.160 to 
exclude the numerical values that result when the performance standards 
are calculated. We have further adopted a policy under which we may 
update a measure's performance standards for a fiscal year once if we 
identify data issues, calculation errors, or other problems that would 
significantly affect the displayed performance standards (79 FR 50079). 
We refer readers to the FY 2014 IPPS/LTCH PPS final rule for the 
complete set of FY 2016 performance standards (78 FR 50697 through 
50698).
b. Technical Updates
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50077 through 
50079), we adopted a policy under which we may adopt technical updates 
to performance standards under the Hospital VBP Program. We adopted 
this policy by amending the definition of ``performance standards'' 
under 42 CFR 412.160 of our regulations to enable us to update 
performance standards' numerical values to incorporate nonsubstantive 
technical updates made to Hospital VBP Program measures between the 
time that they are adopted for a particular program year and the time 
that we actually calculate hospital performance on those measures after 
the performance period for the program year has concluded. We stated 
our intent to continue to use rulemaking to adopt substantive updates 
to measures adopted for the Hospital VBP Program. We stated that 
examples of changes that we might consider to be substantive include 
those in which the changes are so significant that the measure is no 
longer the same measure or when a standard of performance assessed by a 
measure becomes more stringent. However, we stated our intent to 
determine what constitutes substantive versus nonsubstantive changes on 
a case-by-case basis, although we affirmed our intent to be as 
transparent as possible with stakeholders about any such updates we 
might adopt.
    On January 29, 2015, we announced a technical update to the 
performance standards that we have adopted for the PSI-90 measure for 
the FY 2017 program year. The announcement was published on QualityNet 
and can be viewed at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetBasic&cid=1228774624610. The update resulted from a more recent AHRQ Quality Indicator 
software version becoming available. The FY 2017 performance standards 
were initially calculated using Version 4.4 of the AHRQ software, and 
the update allowed us to use Version 4.5a for both the performance 
standards and hospital results.
    For more detailed information on the updates implemented in Version 
4.5a, we refer readers to the Log of Coding Updates and revisions, 
posted on QualityNet, available at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228695355425. For more information on differences between Version 4.5a and 
previous versions of the software, we

[[Page 24506]]

refer readers to the AHRQ Web site, available at: http://qualityindicators.ahrq.gov or to the AHRQ help desk directly, available 
at: [email protected] or (307) 427-1949.
c. Proposed Performance Standards for the FY 2018 Program Year
    In accordance with our finalized methodology for calculating 
performance standards (discussed more fully in the Hospital Inpatient 
VBP Program final rule (76 FR 26511 through 26513)), we are proposing 
to adopt the following additional performance standards for the FY 2018 
program year. We note that the numerical values for the performance 
standards displayed below represent estimates based on the most 
recently available data, and we intend to update the numerical values 
in the FY 2016 IPPS/LTCH PPS final rule. We note further that the MSPB-
1 measure's performance standards are based on performance period data; 
therefore, we are unable to provide numerical equivalents for the 
standards at this time.
    We note further that the performance standards for the NHSN 
measures, the PSI-90 measure, and the MSPB-1 measure are calculated 
with lower values representing better performance. This distinction is 
made in contrast to other measures for which higher values indicate 
better performance. As discussed further in the FY 2014 IPPS/LTCH PPS 
final rule, the performance standards for the Colon and Abdominal 
Hysterectomy SSI are computed separately for each procedure stratum, 
and we will first award achievement and improvement points to each 
stratum separately, then compute a weighted average of the points 
awarded to each stratum by predicted infections (78 FR 50684).

 Previously Adopted and Proposed Performance Standards for the FY 2018 Program Year: Safety, Clinical Care, and
                                     Efficiency and Cost Reduction Measures
----------------------------------------------------------------------------------------------------------------
             Measure ID                      Description           Achievement threshold         Benchmark
----------------------------------------------------------------------------------------------------------------
                                                 Safety Measures
----------------------------------------------------------------------------------------------------------------
CAUTI *............................  National Healthcare Safety   0.916.................  0.000.
                                      Network Catheter-
                                      associated Urinary Tract
                                      Infection Outcome Measure.
CLABSI *...........................  National Healthcare Safety   0.401.................  0.000.
                                      Network Central line-
                                      associated Bloodstream
                                      Infection Outcome Measure.
CDI *..............................  National Healthcare Safety   0.776.................  0.000.
                                      Network Facility-wide
                                      Inpatient Hospital-onset
                                      Clostridium difficile
                                      Infection Outcome Measure.
MRSA bacteremia *..................  National Healthcare Safety   0.766.................  0.000.
                                      Network Facility-wide
                                      Inpatient Hospital-onset
                                      Methicillin-resistant
                                      Staphylococcus aureus
                                      Bacteremia Outcome Measure.
PSI-90  *..............  Patient safety for selected  0.577321..............  0.397051.
                                      indicators (composite).
Colon and Abdominal Hysterectomy     American College of
 SSI *.                               Surgeons--Centers for
                                      Disease Control and
                                      Prevention Harmonized
                                      Procedure Specific
                                      Surgical Site Infection
                                      Outcome Measure.
                                      Colon.............   0.801........   0.000.
                                      Abdominal            0.745........   0.000.
                                      Hysterectomy.
PC-01..............................  Elective Delivery..........  0.022989..............  0.000.
----------------------------------------------------------------------------------------------------------------
                                             Clinical Care Measures
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI ...........  Hospital 30-Day, All-Cause,  0.851458 *............  0.871669.*
                                      Risk-Standardized
                                      Mortality Rate Following
                                      Acute Myocardial
                                      Infarction Hospitalization
                                      *.
MORT-30-HF ............  Hospital 30-Day, All-Cause,  0.881794 *............  0.903985.*
                                      Risk-Standardized
                                      Mortality Rate Following
                                      Heart Failure *.
MORT-30-PN ............  Hospital 30-Day, All-Cause,  0.882986 *............  0.908124.*
                                      Risk-Standardized
                                      Mortality Rate Following
                                      Pneumonia Hospitalization
                                      *.
----------------------------------------------------------------------------------------------------------------
                                      Efficiency and Cost Reduction Measure
----------------------------------------------------------------------------------------------------------------
MSPB-1 *...........................  Payment-Standardized         Median Medicare         Mean of the lowest
                                      Medicare Spending per        Spending per            decile Medicare
                                      Beneficiary.                 Beneficiary ratio       Spending per
                                                                   across all hospitals    Beneficiary ratios
                                                                   during the              across all hospitals
                                                                   performance period.     during the
                                                                                           performance period.
----------------------------------------------------------------------------------------------------------------
* Lower values represent better performance.
 Previously adopted performance standards.

    Based on public comments in the FY 2015 IPPS/LTCH PPS final rule, 
we are proposing to adopt the ``normalization'' approach to scoring the 
PCCEC/CC domain, which will introduce only minor changes to the 
original scoring formula, as follows. For purposes of the HCAHPS Base 
Score, the new CTM-3 dimensions would be calculated in the same manner 
as the eight existing HCAHPS dimensions. For each of the nine 
dimensions, Achievement Points (0-10 points) and Improvement Points (0-
9 points) would be calculated, the larger of which would be summed 
across the nine dimensions to create a prenormalized HCAHPS Base Score 
(0-90 points, as compared to 0-80 points when only eight dimensions 
were included). The prenormalized HCAHPS Base Score would then be 
multiplied by 8/9 (0.88888) and rounded according to standard rules 
(values of 0.5 and higher are rounded up, values below 0.5 are rounded 
down) to create the normalized HCAHPS Base Score. Each of the nine 
dimensions would be of equal weight,

[[Page 24507]]

so that, as before, the normalized HCAHPS Base Score would range from 0 
to 80 points. HCAHPS Consistency Points would then be calculated in the 
same manner as before and would continue to range from 0 to 20 points. 
The Consistency Points would now consider scores across all nine of the 
PCCEC/CC dimensions. The final element of the scoring formula would be 
the sum of the HCAHPS Base Score and the HCAHPS Consistency Points and 
will range from 0 to 100 points, as before.

 Proposed Performance Standards for the FY 2018 Program Year Patient and Caregiver-Centered Experience of Care/
                                            Care Coordination Domain
----------------------------------------------------------------------------------------------------------------
                                                                                    Achievement
                     HCAHPS Survey dimension                           Floor         threshold       Benchmark
                                                                     (percent)       (percent)       (percent)
----------------------------------------------------------------------------------------------------------------
Communication with Nurses.......................................           52.85           78.45           86.70
Communication with Doctors......................................           59.48           80.56           88.59
Responsiveness of Hospital Staff................................           37.91           65.22           80.35
Pain Management.................................................           50.17           70.26           78.44
Communication about Medicines...................................           45.50           63.38           73.61
Hospital Cleanliness & Quietness................................           43.43           65.58           79.25
Discharge Information...........................................           62.00           86.50           91.58
3-Item Care Transition *........................................           27.28           51.33           62.18
Overall Rating of Hospital......................................           36.94           70.15           84.72
----------------------------------------------------------------------------------------------------------------
* Newly proposed measure.

    We are inviting public comments on these proposed performance 
standards.
d. Previously Adopted Performance Standards for Certain Measures for 
the FY 2019 Program Year
    As discussed above, we have adopted certain Safety and Clinical 
Care domain measures for future program years in order to ensure that 
we can adopt baseline and performance periods of sufficient length for 
performance scoring purposes. In the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 50062 through 50065), we adopted the PSI-90 measure in the 
Safety domain and the THA/TKA measure in the Clinical Care domain for 
the FY 2019 program year. As with the PSI-90, MSPB-1, and NHSN measures 
described above, the THA/TKA measure is calculated with lower values 
representing better performance. Therefore, in the FY 2015 IPPS/LTCH 
PPS final rule we adopted the following performance standards for the 
FY 2019 program year (79 FR 50077):

  Previously Adopted Performance Standards for Certain Safety and Clinical Care Domain Measures for the FY 2019
                                                  Program Year
----------------------------------------------------------------------------------------------------------------
                                                                                    Achievement
                 Measure ID                              Description                 threshold       Benchmark
----------------------------------------------------------------------------------------------------------------
                                                 Safety Measures
----------------------------------------------------------------------------------------------------------------
PSI-90 *...................................  Patient Safety for Selected                0.853715        0.589462
                                              Indicators (Composite).
----------------------------------------------------------------------------------------------------------------
                                             Clinical Care Measures
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI................................  Hospital 30-Day, All-Cause, Risk-          0.850671        0.873263
                                              Standardized Mortality Rate
                                              Following Acute Myocardial
                                              Infarction Hospitalization.
MORT-30-HF.................................  Hospital 30-Day, All-Cause, Risk-          0.883472        0.908094
                                              Standardized Mortality Rate
                                              Following Heart Failure
                                              Hospitalization.
MORT-30-PN.................................  Hospital 30-Day, All-Cause, Risk-          0.882334        0.909460
                                              Standardized Mortality Rate
                                              Following Pneumonia
                                              Hospitalization.
THA/TKA *..................................  Hospital-Level                             0.032229        0.023178
                                              Risk[dash]Standardized
                                              Complication Rate Following
                                              Elective Primary Total Hip
                                              Arthroplasty and/or Total Knee
                                              Arthroplasty.
----------------------------------------------------------------------------------------------------------------
* Lower values represent better performance.

e. Previously Adopted and Newly Proposed Performance Standards for 
Certain Measures for the FY 2020 Program Year
    As discussed above, we have adopted certain Safety and Clinical 
Care domain measures for future program years in order to ensure that 
we can adopt baseline and performance periods of sufficient length for 
performance scoring purposes. In the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 50063 through 50065), we adopted the PSI-90 measure in the 
Safety domain and the THA/TKA measure in the Clinical Care domain for 
the FY 2019 program year and subsequent years. In the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50077), we also adopted the following performance 
standards for the MORT-30-AMI, MORT-30-HF, MORT-30-PN, and THA/TKA 
measures for the FY 2020 program year. In this proposed rule, we are 
proposing performance standards for the PSI-90 measure for the FY 2020 
program year as set forth below:

[[Page 24508]]



    Previously Adopted and Proposed Performance Standards for Certain Clinical Care Domain and Safety Domain
                                      Measures for the FY 2020 Program Year
----------------------------------------------------------------------------------------------------------------
                                                                                    Achievement
                 Measure ID                              Description                 threshold       Benchmark
----------------------------------------------------------------------------------------------------------------
                                                  Safety Domain
----------------------------------------------------------------------------------------------------------------
PSI-90*....................................  Patient Safety for Selected                0.778761        0.545903
                                              Indicators (Composite).
----------------------------------------------------------------------------------------------------------------
                                              Clinical Care Domain
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI ...................  Hospital 30-Day, All-Cause, Risk-          0.853715        0.875869
                                              Standardized Mortality Rate
                                              Following Acute Myocardial
                                              Infarction Hospitalization.
MORT-30-HF ....................  Hospital 30-Day, All-Cause, Risk-          0.881090        0.906068
                                              Standardized Mortality Rate
                                              Following Heart Failure
                                              Hospitalization.
MORT-30-PN ....................  Hospital 30-Day, All-Cause, Risk-          0.882266        0.909532
                                              Standardized Mortality Rate
                                              Following Pneumonia
                                              Hospitalization.
THA/TKA * .....................  Hospital-Level Risk-Standardized           0.032229        0.023178
                                              Complication Rate Following
                                              Elective Primary Total Hip
                                              Arthroplasty and/or Total Knee
                                              Arthroplasty.
----------------------------------------------------------------------------------------------------------------
* Lower values represent better performance.
 Previously adopted performance standards.

f. Proposed Performance Standards for Certain Measures for the FY 2021 
Program Year
    We are proposing the following performance standards for the FY 
2021 program year for the Clinical Care domain measures (THA/TKA, MORT-
30-HF, MORT-30-AMI, MORT-30-PN, and the proposed MORT-30-COPD):

          Proposed Performance Standards for Clinical Care Domain Measures for the FY 2021 Program Year
----------------------------------------------------------------------------------------------------------------
                                                                                    Achievement
                 Measure ID                              Description                 threshold       Benchmark
----------------------------------------------------------------------------------------------------------------
                                             Clinical Care Measures
----------------------------------------------------------------------------------------------------------------
MORT-30-AMI................................  Hospital 30-Day, All-Cause, Risk-          0.860355        0.879714
                                              Standardized Mortality Rate
                                              Following Acute Myocardial
                                              Hospitalization.
MORT-30-HF.................................  Hospital 30-Day, All-Cause, Risk-          0.883803        0.906144
                                              Standardized Mortality Rate
                                              Following Heart Failure
                                              Hospitalization.
MORT-30-PN.................................  Hospital 30-Day, All-Cause, Risk-          0.886443         0.91067
                                              Standardized Mortality Rate
                                              Following Pneumonia
                                              Hospitalization.
MORT-30-COPD...............................  Hospital 30-Day, All-Cause, Risk-          0.860355        0.879714
                                              Standardized Mortality Rate
                                              Following Chronic Obstructive
                                              Pulmonary Disease Hospitalization.
THA/TKA *..................................  Hospital-Level Risk-Standardized            0.03089        0.022304
                                              Complication Rate Following
                                              Elective Primary Total Hip
                                              Arthroplasty/Total Knee
                                              Arthroplasty.
----------------------------------------------------------------------------------------------------------------
* Lower values represent better performance.

8. Proposed FY 2018 Program Year Scoring Methodology
a. Proposed Domain Weighting for the FY 2018 Program Year for Hospitals 
That Receive a Score on All Domains
    In the FY 2015 IPPS/LTCH PPS final rule, we adopted the following 
domains and domain weights for the FY 2017 program year for hospitals 
that receive a score in all newly aligned domains:

  Domain Weights for the FY 2017 Program Year for Hospitals Receiving a
                          Score on All Domains
------------------------------------------------------------------------
                  Domain                               Weight
------------------------------------------------------------------------
Safety....................................  20 percent.
Clinical Care.............................  30 percent.
     Clinical Care--Outcomes......    25 percent.
     Clinical Care--Process.......    5 percent.
Efficiency and Cost Reduction.............  25 percent.
Patient and Caregiver-Centered Experience   25 percent.
 of Care/Care Coordination.
------------------------------------------------------------------------


[[Page 24509]]

    For the FY 2018 program year, we are proposing to remove two 
``topped-out'' measures from the Clinical Care--Process subdomain. In 
addition, we are proposing to move one measure (PC-01) from the 
Clinical Care--Process subdomain to the Safety domain and to remove the 
Clinical Care--Process subdomain.
    If these proposals are adopted, the Safety domain will include 
seven measures for the FY 2018 program year, including PC-01, which 
would be new to that domain. Because we are proposing to move one 
measure to the Safety domain, and because we continue to believe that 
hospitals should be provided strong incentives to perform well on 
measures of patient safety, we are proposing to increase the Safety 
domain's weight by 5 percentage points. We are proposing to adopt the 
following FY 2018 program year domain weighting for hospitals receiving 
a score on all proposed newly-aligned domains:

   Proposed Domain Weights for the FY 2018 Program Year for Hospitals
                    Receiving a Score on All Domains
------------------------------------------------------------------------
                  Domain                               Weight
------------------------------------------------------------------------
Safety....................................  25 percent.
Clinical Care.............................  25 percent.
Efficiency and Cost Reduction.............  25 percent.
Patient and Caregiver-Centered Experience   25 percent.
 of Care/Care Coordination.
------------------------------------------------------------------------

    We are inviting public comments on the proposed domain weights.
b. Proposed Domain Weighting for the FY 2018 Program Year for Hospitals 
Receiving Scores on Fewer Than Four Domains
    In prior program years, we finalized a policy that hospitals must 
have received domain scores on all finalized domains in order to 
receive a TPS. However, because the Hospital VBP Program has evolved 
from its initial two domains to an expanded measure set with additional 
domains, we considered whether it was appropriate to continue this 
policy.
    Therefore, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53606 
through 53607), we finalized our proposal that, for the FY 2015 program 
year and subsequent years, hospitals with sufficient data to receive at 
least two out of the four domain scores that existed for the FY 2015 
program year (that is, sufficient cases and measures to receive a 
domain score on at least two domains) will receive a TPS. We also 
finalized our proposal that, for hospitals with at least two domain 
scores, TPSs would be reweighted proportionately to the scored domains 
to ensure that the TPS is still scored out of a possible 100 points and 
that the relative weights for the scored domains remain equivalent to 
the weighting which occurs when there are scores in all four domains. 
We believe that this approach allows us to include relatively more 
hospitals in the Hospital VBP Program while continuing to focus on 
reliably scoring hospitals on their quality measure performance.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50701 through 
50702), we continued this approach for the FY 2016 program year and 
subsequent program years for purposes of eligibility for the program.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50084 through 
50085), we adopted a policy that, for the FY 2017 program year and 
subsequent years, hospitals must receive domain scores on at least 
three quality domains in order to receive a TPS. We stated our belief 
that, by adopting this policy, we will continue to allow as many 
hospitals as possible to participate in the program while ensuring that 
reliable TPSs result. We also finalized a policy that hospitals with 
sufficient data on at least three of four domains for FY 2017 will have 
their TPSs proportionately reweighted. Finally, in the FY 2015 IPPS/
LTCH PPS final rule, we adopted case minimums for the FY 2016 program 
year and subsequent years (79 FR 50085 through 50086).
    Under these policies, in order to receive a TPS for the FY 2018 
program year:
     Hospitals must meet the requirements to receive an HCAHPS 
Survey measure score in order to receive a PCCEC/CC domain score. 
Hospitals must report a minimum number of 100 HCAHPS surveys for a 
hospital to receive a PCCEC/CC domain score (76 FR 26530).
     Hospitals must meet the requirements to receive a MSPB-1 
measure score in order to receive an Efficiency and Cost Reduction 
domain score. Hospitals must report a minimum number of 25 cases for 
the MSPB-1 measure (77 FR 53609 through 53610).
     Hospitals must receive a minimum of two measure scores 
within the Clinical Care domain. Hospitals must report a minimum number 
of 25 cases for each of the mortality measures (77 FR 53609 through 
53610).
     Hospitals must receive a minimum of three measure scores 
within the Safety domain.
    ++ Hospitals must report a minimum of three cases for any 
underlying indicator for the PSI-90 measure based on AHRQ's measure 
methodology (77 FR 53608 through 53609).
    ++ Hospitals must report a minimum of one predicted infection for 
NHSN-based surveillance measures based on CDC's minimum case criteria 
(77 FR 53608 through 53609).
    ++ Hospitals must report a minimum of 10 cases for the PC-01 
measure (76 FR 26530).
    We are not proposing any changes to the minimum numbers of cases 
and measures that we have adopted above. However, because we are 
proposing to remove the Clinical Care--Process subdomain from the 
Hospital VBP Program effective with the FY 2018 program year, we 
considered whether we should revisit our finalized requirement that 
hospitals must receive scores on at least three domains in order to 
receive a TPS. However, we continue to believe that this requirement 
appropriately balances our desire to enable as many hospitals as 
possible to participate in the Hospital VBP Program and the need for 
TPSs to be sufficiently reliable to provide meaningful distinctions 
between hospitals' performance on quality measures. We are not 
proposing to change this requirement at this time. We welcome public 
comments on whether we should consider adopting a different policy on 
this topic. We will continue to proportionately reweight hospitals' 
TPSs when they have sufficient data on only three domains.

G. Proposed Changes to the Hospital-Acquired Condition (HAC) Reduction 
Program

1. Background
    We refer readers to section V.I.1.a. of the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50707 through 50708) for a general overview of the 
HAC Reduction Program.

[[Page 24510]]

2. Statutory Basis for the HAC Reduction Program
    Section 3008 of the Affordable Care Act added section 1886(p) to 
the Act to provide an incentive for certain hospitals to reduce the 
incidence of HACs. Section 1886(p) of the Act requires the Secretary to 
make an adjustment to payments to ``applicable hospitals'' effective 
beginning on October 1, 2014, and for subsequent program years. Section 
1886(p)(1) of the Act sets forth the requirements by which payments to 
``applicable hospitals'' will be adjusted to account for HACs with 
respect to discharges occurring during FY 2015 or later. For hospitals 
with HAC scores in the top quartile relative to other applicable 
hospitals for a given fiscal year, the amount of Medicare payment is 
reduced to 99 percent of the amount of payment that would otherwise 
apply to discharges under section 1886(d) or 1814(b)(3) of the Act, as 
applicable. Section 1886(p)(2)(A) of the Act defines ``applicable 
hospitals'' as subsection (d) hospitals that meet certain criteria. 
Section 1886(p)(2)(B)(i) of the Act defines these criteria and 
specifies that the payment adjustment would apply to an applicable 
hospital that ranks in the top quartile (25 percent) of all subsection 
(d) hospitals, relative to the national average, of conditions acquired 
during the applicable period, as determined by the Secretary. Section 
1886(p)(2)(B)(ii) of the Act requires the Secretary to establish and 
apply a risk-adjustment methodology in calculating HAC scores for each 
hospital.
    Sections 1886(p)(3) and (p)(4) of the Act define ``hospital-
acquired conditions'' and ``applicable period,'' respectively. The term 
``hospital-acquired condition'' means ``a condition identified in 
subsection 1886(d)(4)(D)(iv) of the Act and any other condition 
determined appropriate by the Secretary that an individual acquires 
during a stay in an applicable hospital, as determined by the 
Secretary.'' The term ``applicable period'' means, with respect to a 
fiscal year, a period specified by the Secretary.
    Section 1886(p)(5) of the Act requires that, prior to FY 2015 and 
each subsequent fiscal year, the Secretary provide confidential reports 
to each applicable hospital with respect to the HAC Reduction Program 
scores for the applicable period, to give the hospitals an opportunity 
to review and correct the data. Section 1886(p)(6)(A) of the Act sets 
forth the reporting requirements by which the Secretary would make 
information available to the public regarding HACs for each applicable 
hospital. Section 1886(p)(6)(B) of the Act requires the Secretary to 
ensure that an applicable hospital has the opportunity to review, and 
submit corrections for, the information to be made public with respect 
to the HAC scores of the applicable hospital prior to such information 
being made public. Section 1886(p)(6)(C) of the Act requires that, once 
corrected, the HAC scores be posted on the Hospital Compare Web site 
(http://www.medicare.gov/hospitalcompare/search.html) in an easily 
understandable format.
    Section 1886(p)(7) of the Act limits administrative and judicial 
review of certain determinations made pursuant to section 1886(p) of 
the Act. These determinations include: what qualifies as an applicable 
hospital; the specifications of a HAC; the Secretary's determination of 
the ``applicable period''; the provision of confidential reports 
submitted to the applicable hospital; and the information publicly 
reported on the Hospital Compare Web site.
3. Overview of Previous HAC Reduction Program Rulemaking
    For a further description of our policies for the HAC Reduction 
Program, we refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 
FR 50707 through 50729) and the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50087 through 50104). These policies describe the general framework for 
implementation of the HAC Reduction Program including: (a) The relevant 
definitions applicable to the program; (b) the payment adjustment under 
the program; (c) the measure selection and conditions for the program, 
including a risk-adjustment and scoring methodology; (d) performance 
scoring; (e) the process for making hospital-specific performance 
information available to the public, including the opportunity for a 
hospital to review the information and submit corrections; and (f) 
limitation of administrative and judicial review.
    We also have codified certain requirements of the HAC Reduction 
Program at 42 CFR 412.170 through 412.172.
4. Implementation of the HAC Reduction Program for FY 2016
    We are not proposing any changes to the above described policies 
for the implementation of the HAC Reduction Program for FY 2016. 
However, we are reminding readers that, in the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 50101 through 50102), we finalized the following 
measures for use in the FY 2016 program: AHRQ PSI-90 Composite and CDC 
Central Line-Associated Bloodstream Infection (CLABSI), Catheter-
Associated Urinary Tract Infection (CAUTI) and Colon and Abdominal 
Hysterectomy Surgical Site Infection (SSI). We are not proposing to add 
or remove any measures for FY 2016.
    We are providing an update on NQF proceedings for three of the 
measures previously finalized for the FY 2016 program: PSI-90 
Composite; CLABSI; and CAUTI. For FY 2016, we are retaining the AHRQ 
PSI-90 Composite measure (in Domain 1) that we adopted in the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50717). As we noted in the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50090), the AHRQ PSI-90 Composite 
measure is undergoing NQF maintenance review. The PSI-90 Composite 
measure currently consists of eight component indicators: PSI-3 
Pressure ulcer rate; PSI-6 Iatrogenic pneumothorax rate; PSI-7 Central 
venous catheter-related blood stream infections rate; PSI-8 
Postoperative hip fracture rate; PSI-12 Postoperative pulmonary 
embolism/Deep vein thrombosis rate; PSI-13 Postoperative sepsis rate; 
PSI-14 Wound dehiscence rate; and PSI-15 Accidental puncture and 
laceration rate.
    As part of the NQF maintenance review process, AHRQ is considering 
the addition of PSI-9 Perioperative hemorrhage rate, PSI-10 
Perioperative physiologic metabolic derangement rate, and PSI-11 Post-
operative respiratory failure rate measures, or a combination of these 
three measures, to the PSI-90 Composite measure. We consider the 
potential inclusion of additional component measures in the PSI-90 
Composite measure to be a significant change to the measure and, if 
that occurs, we would engage in notice-and-comment rulemaking prior to 
requiring the reporting of the revised composite for the HAC Reduction 
Program. At this time, the AHRQ PSI-90 Composite measure is continuing 
to undergo NQF maintenance review. No changes have been finalized. 
Therefore, we are not proposing any changes to this measure at this 
time.
    Similarly, in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50090), 
we noted that the CDC NHSN CAUTI and CLABSI measures in Domain 2 that 
we adopted in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717) for 
inclusion in FYs 2015, 2016 and 2017 were undergoing NQF maintenance 
review. We stated in the FY 2015 IPPS/LTCH PPS final rule that if there 
are significant changes to these measures, we would engage in notice-
and-comment rulemaking prior to requiring the reporting of the revised

[[Page 24511]]

measures. These measures have now completed the NQF maintenance review 
process, and modified versions of the measures were reendorsed by NQF 
on November 10, 2014.\72\ We note that reendorsed versions of the CDC 
NHSN CLABSI and CAUTI measures included a new statistical option for 
calculating the measure result, the Adjusted Ranking Metric (ARM), in 
addition to the standardized infection ratio (SIR) statistical option. 
For FY 2016, we will continue use of the CDC NHSN CLABSI and CAUTI 
measures as previously finalized for the program with use of the SIR. 
We will be working with CDC in the future to determine if the newly 
available ARM would be appropriate for use in the HAC Reduction 
Program. If we determine at a later time that the ARM is appropriate 
for use in the HAC Reduction Program and provides an advantage to the 
existing measure result (the SIR), we will propose this change in 
notice-and-comment rulemaking.
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    \72\ National Quality Forum. Measures search. Available at: 
http://www.qualityforum.org/QPS/MeasureDetails.aspx?standardID=1122&print=0&entityTypeID=1 and 
http://www.qualityforum.org/QPS/MeasureDetails.aspx?standardID=1121&print=0&entityTypeID=1.
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    We also note that we anticipate providing hospitals with their 
confidential hospital-specific reports and discharge level information 
used in the calculation of their FY 2016 Total HAC Score in late summer 
2015 via the QualityNet Secure Portal.\73\ In order to have access to 
their hospital-specific reports, hospitals must register for a 
QualityNet Secure Portal account. We did not make any changes to the 
review and correction policies for FY 2016. Hospitals have a period of 
30 days after the information is posted to the QualityNet Secure Portal 
to review and submit corrections for the calculation of their HAC 
Reduction Program measure scores, domain scores, and Total HAC Score 
for the fiscal year.
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    \73\ Available at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetBasic&cid=1228773343598.
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5. Proposed Changes for Implementation of the HAC Reduction Program for 
FY 2017
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50102), we finalized 
the following measures for use in the FY 2017 program: AHRQ PSI-90 
Composite and CDC NHSN CLABSI, CAUTI, Colon and Abdominal Hysterectomy 
SSI, Methicillin-Resistant Staphylococcus aureus (MRSA) Bacteremia, and 
Clostridium difficile (CDI). We are not proposing any changes to this 
measure set for FY 2017. We also are not proposing to make any changes 
to the measures from how they were finalized for use in the FY 2016 
program (CAUTI, CLABSI, and Colon and Abdominal Hysterectomy SSI) or FY 
2017 program (MRSA Bacteremia and CDI).
    For FY 2017, we are proposing three changes to existing program 
policies: (1) The dates of the time period used to calculate hospital 
performance; (2) the addition of a narrative rule used in the 
methodology to calculate the Domain 2 score; and (3) the relative 
contribution of Domain 1 (patient safety) and Domain 2 (infection) to 
the Total HAC Score. Each proposal is described in more detail below.
a. Proposed Applicable Time Period for the FY 2017 HAC Reduction 
Program
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50717), we finalized 
and codified policy at 42 CFR 412.170 that provided that there will be 
a 2-year applicable time period to collect data used to calculate the 
Total HAC Score.
    For FY 2017, we are proposing to continue similar 2-year time 
periods for the calculation of HAC Reduction Program measure results. 
For the Domain 1 measure (AHRQ PSI-90 Composite measure), we would use 
the 24-month period from July 1, 2013 through June 30, 2015. The claims 
for all Medicare FFS beneficiaries discharged during this period would 
be included in the calculations of measure results for FY 2017. For the 
CDC NHSN measures previously finalized for use in the FY 2017 HAC 
Reduction Program (CLABSI, CAUTI, Colon and Abdominal Hysterectomy SSI, 
MRSA Bacteremia, and CDI), we would use data from CYs 2014 and 2015.
    We are seeking public comment on the proposal to use these updated 
time periods for calculation of measure results for the FY 2017 
program.
b. Proposed Narrative Rule Used in Calculation of the Domain 2 Score 
for the FY 2017 HAC Reduction Program
    We noted in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50723) that 
there will be instances in which applicable hospitals may not have data 
on all Domain 1 and 2 measures, and, therefore, a set of narrative 
rules was finalized to determine how to score each Domain. The scoring 
rules were finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50723 through 50725) and clarified in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50096 through 50098). For FY 2017, we will follow the rules 
as previously finalized. As described below, we also are proposing an 
additional narrative rule for use beginning in the FY 2017 program 
year. This additional narrative rule would be applicable to calculation 
of the Domain 2 score and would treat each Domain 2 measure 
independently when determining if a score of 10 (maximal score) should 
be assigned to the measure for nonsubmission of data without a waiver 
(if applicable).
    We note that the current narrative rules for Domain 2 assign a 
score for each Domain 2 measure and the measure scores are averaged to 
provide a Domain 2 Score. For the FY 2015 and FY 2016 HAC Reduction 
Program, if a hospital reports data for at least one of the Domain 2 
measures, its Domain 2 Score is based solely on the measure(s) the 
hospital reported and the hospital is not assigned the maximum number 
of points for any nonreported measure(s). This approach was employed 
for the FY 2015 and 2016 HAC Reduction Program because the applicable 
periods for the Domain 2 measures for those program years (the FY 2015 
period was January 1, 2012 through December 31, 2013, and the FY 2016 
period was January 1, 2013 through December 31, 2014) occurred, at 
least in part, prior to the announcement of the HAC Reduction Program 
with the publication of the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50707 through 50729) in August 2013. The proposed applicable period for 
Domain 2 measures in the FY 2017 program (CYs 2014 and 2015) occurs in 
its entirety after the HAC Reduction Program was announced. This means 
hospitals were notified of the impact that not reporting these data 
would have on their Total HAC Score before the FY 2017 reporting period 
began (that is, before January 1, 2014). Therefore, we are proposing 
for FY 2017 and subsequent program years that each Domain 2 measure be 
treated independently when determining if a score of 10 (maximal score) 
should be assigned to the measure for nonsubmission of data without a 
waiver (if applicable). For instance, if a hospital does not submit 
data for the Colon and Abdominal Hysterectomy SSI measure and does not 
have a valid waiver for nonreporting, the measure would receive a score 
of 10. This score of 10 would then be combined with the measure scores 
the hospital received for data reported on the other FY 2017 Domain 2 
measures (CLABSI and CAUTI) to calculate the hospital's total Domain 2 
score. The rationale for this proposed change in methodology is to 
encourage hospitals to submit all available data on all measures in the 
program and to further encourage hospitals to reduce all HACs included 
in the program.
    We are inviting public comments on our proposal to implement the 
score calculations discussed above in FY 2017

[[Page 24512]]

and subsequent years, as well as our proposal for an additional 
narrative rule that would treat each Domain 2 measure independently 
when determining if a score of 10 (maximal score) should be assigned to 
the measure for nonsubmission of data without a waiver (if applicable).
c. Proposed Domain 1 and Domain 2 Weights for the FY 2017 HAC Reduction 
Program
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50102), we finalized 
for FY 2016 a methodology for calculating a Total HAC Score for each 
hospital by determining a score for each domain, then multiplying each 
domain score by a weight (Domain 1--AHRQ Patient Safety Indicators, 25 
percent; Domain 2--CDC NHSN measures, 75 percent), and adding together 
the weighted domain scores to determine the Total HAC Score (Sec.  
412.172(e)(3)).
    For FY 2017, we are proposing to adjust the weighting of Domains 1 
and 2 so that the weight of Domain 1 would be 15 percent and the weight 
of Domain 2 would be 85 percent. We are proposing to decrease the 
Domain 1 weight for two reasons. First, with the implementation of the 
CDC MRSA Bacteremia and CDI measures in the FY 2017 program, we believe 
the weighting of both domains needs to be adjusted to reflect the 
addition of the fifth and sixth measure in Domain 2. Second, among the 
public comments on the FY 2014 and FY 2015 IPPS/LTCH PPS final rules 
that were considered, MedPAC and other stakeholders recommended that 
Domain 2 should be weighted more than Domain 1 because they believed 
the CDC NHSN chart-abstracted measures were more reliable and 
actionable than claims-based measures. We are inviting public comments 
on this proposal to decrease the Domain 1 weight from 25 percent to 15 
percent and increase the Domain 2 weight from 75 percent to 85 percent 
for FY 2017.
6. Proposed Measure Refinements for the FY 2018 HAC Reduction Program
a. Proposal to Include Select Ward (Non-Intensive Care Unit (ICU)) 
Locations in Certain CDC NHSN Measures Beginning in the FY 2018 Program 
Year
    We are proposing measure refinements to the CDC NHSN CLABSI and 
CAUTI measures that were previously adopted for the HAC Reduction 
Program to include select ward (non-ICU) locations beginning in FY 
2018. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50712 through 
50719), we adopted the CLABSI and CAUTI measures inclusive of pediatric 
and adult patients in ICUs for the HAC Reduction Program beginning with 
FY 2015. We noted at that time that the Hospital IQR Program finalized 
data collection for these measures for adult and pediatric patients in 
medical, surgical and medical/surgical wards (also referred to as 
select ward locations), in addition to ICU locations, effective 
beginning January 1, 2015, and that we would propose the additional 
locations for the HAC Reduction Program in the future.
    The refined CAUTI and CLABSI measures that include select ward 
locations in addition to ICU locations were endorsed by the NQF in 
2012. The MAP 2015 final recommendations indicated that the CLABSI and 
CAUTI measures with ICU and select ward locations be included in the 
HAC Reduction Program.\74\ We note that during the MAP Hospital 
Workgroup meeting (December 9-10, 2014) and the MAP Coordinating 
Committee meeting (January 26-27, 2015), some members discussed the 
benefit of reporting the modified measures publicly before including 
them in a payment program in order to allow providers and CMS to gain 
experience with the modified measures. Other members expressed concern 
that this could delay implementation of an improved measure \75\. The 
MAP supported the use of the refined measures without stipulating prior 
public reporting as a condition of support. However, we acknowledge the 
importance of this consideration and took it into account when 
considering the timing of implementing the expanded measure in the HAC 
Reduction Program.
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    \74\ Available at: http://www.qualityforum.org/map/.
    \75\ Ibid.
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    We considered a number of options for when to begin using the 
refined measures in the HAC Reduction Program. The CDC NHSN measure 
data used in the HAC Reduction Program are obtained from data that 
hospitals report as part of their participation in the Hospital IQR 
program. Therefore, due to the timing of the Hospital IQR Program 
including select ward locations (beginning January 1, 2015), the FY 
2017 HAC Reduction Program, using the applicable period of CYs 2014 and 
2015 for the CDC NHSN measures, is the first time data from select ward 
locations could be included in the program. However, using select ward 
location data in the FY 2017 program would result in hospitals with ICU 
locations having the opportunity to contribute 2 years of data, while 
hospitals without ICU locations would have the opportunity to 
contribute 1 year of data for measure result calculation. We believe 
this systematically unequal distribution of data could introduce bias 
in the program and should be avoided. If the introduction of select 
ward location data for the CLABSI and CAUTI measures is delayed until 
the FY 2018 HAC Reduction Program (applicable period would likely be 
CYs 2015 and 2016), all hospitals, regardless of whether or not they 
have ICUs, would have the opportunity to contribute 2 years of data for 
measure result calculations.
    In addition, delaying implementation until FY 2018 would allow CMS 
and providers to gain some experience with the impact that the 
inclusion of these data would have on a hospital's HAC Reduction 
Program scores. We also considered the possibility of further delaying 
implementation of the refined measures until the FY 2019 program 
(applicable period would likely be CYs 2016 and 2017) in order to not 
include the first year of reporting (CY 2015) in a payment program 
measure calculation.
    After considering these three options, we are proposing to include 
data from pediatric and adult medical ward, surgical ward, and medical/
surgical ward locations in addition to data from adult and pediatric 
ICU locations for the CDC NHSN CLABSI and CAUTI measures beginning with 
the FY 2018 HAC Reduction Program. This option balances our belief that 
the refinement of the CLABSI and CAUTI measures to include select ward 
locations results in an improved measure that more accurately captures 
hospital-wide performance regarding these HACs with the need to provide 
hospitals with the opportunity to submit data for the full period of 
performance and the desire to gain experience with the refined measures 
before incorporating them into the HAC Reduction Program. We also 
believe this measure refinement will allow hospitals that do not have 
ICU locations to use the tools and resources of the NHSN for quality 
improvement and public reporting efforts (78 FR 50787).
    We are inviting public comment on our proposal.
b. Update to CDC NHSN Measures Standard Population Data
    In this section, we provide information regarding upcoming changes 
to the standard population data that are used to calculate the SIR for 
the CDC NHSN measures. These changes are occurring as part of routine 
measure maintenance.

[[Page 24513]]

    The CDC NHSN measures are used to monitor hospital performance on 
prevention of healthcare-associated infections (HAIs). For each NHSN 
measure, CDC calculates the SIR, which compares a hospital's observed 
number of HAIs to the number of infections predicted for the hospital, 
adjusting for several risk factors.\76\ The predicted number of 
infections is determined using patient care location characteristics 
(for example, the number of central line days) and infection rates that 
occurred among a standard population during a specified time period 
(sometimes referred to by CDC as ``national baseline'' but referred to 
here as ``standard population data''). For example, CDC currently uses 
data collected in CY 2009 for the CAUTI measure to determine the 
standard population data.\77\ For more information about the method by 
which NHSN measures are calculated, we refer readers to QualityNet's 
Web page on HAI measures, which may be found at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228760487021.
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    \76\ Available at: http://www.cdc.gov/nhsn/PDFs/Newsletters/NHSN_NL_OCT_2010SE_final.pdf.
    \77\ Available at: http://www.cdc.gov/nhsn/pdfs/pscManual/7pscCAUTIcurrent.pdf; and http://www.cdc.gov/HAI/surveillance/QA_stateSummary.html.
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    As part of routine measure maintenance, CDC will be updating the 
standard population data to ensure the NHSN measures' number of 
predicted infections reflects the current state of HAIs in the United 
States.\78\ Beginning January 1, 2015, CDC started collecting data to 
use in updating the standard population data for HAI measures. (The CY 
2015 standard population data for HAI measures will hereinafter be 
referred to as ``new standard population data.'') Measure results using 
infections reported in CY 2016 will reflect the use of the new standard 
population data. It is anticipated that the new standard population 
data will affect the HAC Reduction Program beginning in FY 2018 when 
the applicable period for the CDC NHSN measures included in the program 
is likely to include CY 2015 and CY 2016.
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    \78\ Available at: http://www.cdc.gov/nhsn/PDFs/Newsletters/NHSN_NL_OCT_2010SE_final.pdf.
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7. Maintenance of Technical Specifications for Quality Measures
    Technical specifications for AHRQ's PSI-90 Composite measure in 
Domain 1 can be found at AHRQ's Web site at: http://qualityindicators.ahrq.gov/Modules/PSI_TechSpec.aspx. Technical 
specifications for the CDC NHSN HAI measures in Domain 2 can be found 
at CDC's NHSN Web site at: http://www.cdc.gov/nhsn/acute-care-hospital/index.html. Both Web sites provide measure updates and other 
information necessary to guide hospitals participating in the 
collection of HAC Reduction Program data.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50100), we described 
a policy under which we use a subregulatory process to make 
nonsubstantive updates to measures used for the HAC Reduction Program. 
We are not proposing any changes to this policy at this time.
8. Proposed Extraordinary Circumstance Exception Policy for the HAC 
Reduction Program Beginning in FY 2016 and for Subsequent Years
a. Background
    In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 28142), we 
welcomed public comment on whether a potential waiver or exception 
policy for hospitals located in areas that experience disasters or 
other extraordinary circumstances should be implemented, and the policy 
and operational considerations of such an extraordinary circumstance 
exception policy for the HAC Reduction Program. In the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50101), we indicated that we received many 
comments in support of CMS establishing a formal extraordinary 
circumstance exception policy under the HAC Reduction Program. We also 
previously indicated that any specific proposals related to the 
implementation of an extraordinary circumstance exception policy would 
be proposed through notice-and-comment rulemaking. After further 
consideration of commenters' support of CMS establishing an 
extraordinary circumstance exception policy for the HAC Reduction 
Program, we agree with commenters that it may be possible for a 
hospital to experience a certain period of time during which it is not 
able to accurately collect quality measure data and/or to report those 
data in a timely manner due to an extraordinary circumstance beyond its 
control, and that a policy for taking into account such a circumstance 
should be proposed.
    In developing this proposed extraordinary circumstance exception 
policy for the HAC Reduction Program beginning in FY 2016 and for 
subsequent years, we considered a policy and process similar to that 
for the Hospital IQR Program, as finalized in the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51651), modified by the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50836) (designation of a non-CEO hospital contact), and 
further modified in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50277) 
(amended Sec.  412.40(c)(2) to refer to ``extension or exemption'' 
instead of the former ``extension or waiver''). We also considered how 
best to align an extraordinary circumstance exception policy for the 
HAC Reduction Program with existing extraordinary circumstance 
exception policies for other IPPS quality reporting and payment 
programs, such as the Hospital VBP Program, to the extent feasible.
    We considered the feasibility and implications of excluding data 
for certain measures for a limited period of time from the calculations 
for a hospital's measure results or Total HAC score for the applicable 
performance period. By minimizing the data excluded from the program, 
the proposed policy would enable affected hospitals to continue to 
participate in the HAC Reduction Program for a given fiscal year if 
they otherwise continue to meet applicable measure minimum threshold 
requirements. We believe that this approach could help alleviate the 
reporting burden for a hospital that is adversely impacted by a natural 
disaster or other extraordinary circumstance beyond its control, while 
enabling the hospital to continue to participate in the HAC Reduction 
Program.
b. Requests for an Extraordinary Circumstance Exception
    Based upon our prior experience with the Hospital IQR Program and 
the Hospital VBP Program, we anticipate the need to provide exceptions 
to only a small number of hospitals affected by a natural disaster or 
other extraordinary circumstance. During the review of a hospital's 
request for an extraordinary circumstance exception, we will maintain 
the general principle that providing high quality of care and ensuring 
patient safety is of paramount importance. We do not intend to allow a 
hospital to use this proposed policy and the request process to seek 
exclusion from the HAC Reduction Program in its entirety for a given 
fiscal year(s) solely because of experiencing an extraordinary 
circumstance. Rather, we intend to provide relief for a hospital whose 
ability to accurately collect quality measure data and/or to report 
those data in a timely manner has been negatively impacted as a direct 
result of experiencing a significant disaster or other extraordinary 
circumstance beyond the control of the hospital. Section 1886(p)(4) of 
the Act permits the Secretary to determine the ``applicable period'' 
for HAC data

[[Page 24514]]

collection, and we believe that the statute allows us to determine that 
the period not include times when hospitals may encounter extraordinary 
circumstances.
    We are proposing that the request process for an extraordinary 
circumstance exception begin with the submission of an extraordinary 
circumstance exception request form by a hospital within 90 calendar 
days of the natural disaster or other extraordinary circumstance. We 
believe that the 90-calendar day timeframe is an appropriate period of 
time for a hospital to determine whether to submit an extraordinary 
circumstance exception request. It is also the same length of time as 
the current time period allowed under the Hospital VBP Program. Under 
this proposed policy, a hospital would be able to request a HAC 
Reduction Program extraordinary circumstance exception at the same time 
it may request a similar exception under the Hospital IQR Program, the 
Hospital VBP Program, and the Hospital Readmissions Reduction Program 
(if an extraordinary circumstance exception policy is adopted for the 
Hospital Readmissions Reduction Program as described in section IV.E.9. 
of the preamble of this proposed rule). The extraordinary circumstance 
exception request form would be made available on the QualityNet Web 
site (https://www.qualitynet.org/).
    The following minimum set of information would be required to 
submit the request:
     Hospital CCN;
     Hospital name;
     Hospital Chief Executive Officer (CEO) and any other 
designated personnel contact information, including name, email 
address, telephone number, and mailing address (must include a physical 
address; a post office box address is not acceptable);
     Hospital's reason for requesting an exception, including:
    ++ CMS program name (for example, the HAC Reduction Program, the 
Hospital VBP Program, or the Hospital IQR Program);
    ++ The measure(s) and submission quarters affected by the 
extraordinary circumstance that the hospital is seeking an exception 
for should be accompanied with the specific reasons why the exception 
is being sought; and
    ++ How the extraordinary circumstance negatively impacted 
performance on the measure(s) for which an exception is being sought;
     Evidence of the impact of the extraordinary circumstances, 
including but not limited to, photographs, newspaper, and other media 
articles; and
     The request form must be signed by the hospital's CEO or 
designated non-CEO contact and submitted to CMS.
    The same set of information is currently required under the 
Hospital IQR Program and the Hospital VBP Program on the request form 
from a hospital seeking an extraordinary circumstance exception with 
respect to these programs. The specific list of required information 
would be subject to change from time to time at the discretion of CMS.
    Following receipt of the request form, CMS would: (1) Provide a 
written acknowledgement of receipt of the request using the contact 
information provided in the request form to the CEO and any additional 
designated hospital personnel; and (2) provide a formal response to the 
CEO and any additional designated hospital personnel using the contact 
information provided in the request notifying them of the CMS decision. 
Under the proposed policy, we would review each request for an 
extraordinary circumstance exception on a case-by-case basis at CMS' 
discretion. To the extent feasible, we also would review such a request 
in conjunction with any similar requests made under other IPPS quality 
reporting and payment programs, such as the Hospital IQR Program and 
the Hospital VBP Program.
    The proposed policy would not preclude CMS from granting 
extraordinary circumstance exceptions to hospitals that do not request 
them if we determine at our discretion that a disaster or other 
extraordinary circumstance has affected an entire region or locale. If 
CMS makes such a determination to grant an extraordinary circumstance 
exception to hospitals in an affected region or locale, we would convey 
this decision through routine communication channels to hospitals, 
vendors, and QIOs, including, but not limited, to issuing memos, 
emails, and notices on the QualityNet Web site at: https://www.qualitynet.org/. This provision also would align with the Hospital 
IQR Program's extraordinary circumstances extension or exemption 
policy, as set forth in the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51651).
    We are inviting public comment on this proposal.

H. Proposed Elimination of the Simplified Cost Allocation Methodology 
for Hospitals (Sec.  412.302)

1. Background
    The Medicare hospital cost report employs a cost-finding 
methodology to allocate direct and indirect costs using statistics 
appropriate to each department within a hospital. The costs of 
nonrevenue-producing cost centers (general service or overhead cost 
centers) are allocated to each other and to the revenue-producing cost 
centers using statistical bases and related statistics that measure the 
amount of service furnished by each cost center to the other cost 
centers (42 CFR 413.24(b) and (d)). In this regard, cost-finding is the 
process of recasting the data derived from the accounts ordinarily kept 
by a provider to ascertain costs of the various types of services 
furnished (42 CFR 413.24(b)(1)).
    In the FY 1997 IPPS final rule (61 FR 46214 through 46215), CMS 
implemented the simplified cost allocation methodology at 42 CFR 
412.302(d)(4) for hospitals as an alternative to the standard cost-
finding methodology. The simplified cost allocation methodology reduces 
the number of statistical bases that a hospital must maintain. Under 
the simplified cost allocation methodology, a hospital must use a 
prescribed list of statistical bases, without deviation, as set forth 
in the Provider Reimbursement Manual (PRM) (CMS Pub. 15-2), Section 
4020, Form CMS-2552. The simplified cost allocation methodology was 
devised in response to concerns expressed by the hospital industry over 
20 years ago regarding the high costs of the recordkeeping required 
under the cost reporting rules. Since implementation of the simplified 
cost allocation methodology, there have been advances in technology of 
recordkeeping for hospitals, resulting in less arduous and costly 
recordkeeping and a diminished need for hospitals to use the simplified 
cost allocation methodology. It was expected that, although use of the 
simplified cost allocation methodology by hospitals would result in 
reduced recordkeeping costs, it also would likely result in reduced 
Medicare payments to hospitals.
    In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 
50080), we created standard cost centers for Magnetic Resonance Imaging 
(MRI) and computed tomography (CT) scans, and required that hospitals 
report the costs and charges for these services under new cost centers 
on the Medicare cost report Form CMS-2552-10. The new standard cost 
centers for MRIs and CT scans were effective for cost reporting periods 
beginning on or after May 1, 2010.
    Beginning in FY 2014, we started to calculate the MS-DRG relative 
weights using 19 CCRs, including distinct CCRs

[[Page 24515]]

for MRIs and CT scans. In addition, beginning in the CY 2014 OPPS, we 
started to calculate the OPPS relative payment weights using distinct 
CCRs for MRIs and CT scans. Some stakeholders expressed concern that 
CMS was not appropriately determining the cost of advanced imaging for 
inpatient and outpatient hospital services because, when the costs of 
hospitals that use the simplified cost allocation methodology are 
included in cost determinations, less precise CCRs are generated. In 
response to public comments on the FY 2014 IPPS/LTCH PPS proposed rule 
(78 FR 27486) and the CY 2014 OPPS/ASC proposed rule (78 FR 43547), in 
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50521 through 50523) and in 
the CY 2014 OPPS/ASC final rule with comment period (78 FR 74843 
through 74847), we encouraged hospitals to use the statistical basis of 
``dollar value'' for the costs of capital-related movable equipment, 
especially for costly MRI and CT imaging equipment, to support a more 
precise cost allocation and, therefore, more precise CCRs. However, a 
hospital that may have obtained an approval from a MAC under section 
2313 of CMS Pub. 15-1 to use the simplified cost allocation methodology 
was restricted by the prescribed statistical basis of ``square 
footage'' for costs of capital-related movable equipment. In those 
instances, we recommended that hospitals use the statistical basis of 
the dollar value or use the ``Direct Assignment of General Service 
Cost'' method by requesting MAC approval in accordance with section 
2307 of CMS Pub. 15-1.
    In this proposed rule, we are proposing to eliminate the simplified 
cost allocation methodology because, as discussed above, the allocation 
of the costs of capital-related movable equipment using this 
methodology yields less precise calculated CCRs. Currently, less than 1 
percent of hospitals have elected to use the simplified cost allocation 
methodology. Based on FY 2013 data, only 9 of 1,269 CAHs and 23 of 
4,389 hospitals other than CAHs used the simplified cost allocation 
methodology. Furthermore, we believe that advances in technology have 
reduced the cost of recordkeeping, which has allowed hospitals to 
maintain accurate statistical data and afforded them the flexibility to 
change to a more precise allocation methodology.
2. Proposed Changes
    The regulations applicable to the election of the simplified cost 
allocation methodology are located in 42 CFR 412.302. For the reasons 
set forth in section IV.H.1. of the preamble of this proposed rule, we 
are proposing to amend Sec.  412.302 by revising paragraph (d)(4) to 
eliminate a hospital's ability to elect the simplified cost allocation 
methodology under the terms and conditions provided in the instructions 
for CMS Form 2552 for cost reporting periods beginning on or after 
October 1, 2015.

I. Rural Community Hospital Demonstration Program

1. Background
    Section 410A(a) of Public Law 108-173 required the Secretary to 
establish a demonstration program to test the feasibility and 
advisability of establishing ``rural community'' hospitals to furnish 
covered inpatient hospital services to Medicare beneficiaries. The 
demonstration pays rural community hospitals under a reasonable cost-
based methodology for Medicare payment purposes for covered inpatient 
hospital services furnished to Medicare beneficiaries. A rural 
community hospital, as defined in section 410A(f)(1), is a hospital 
that--
     Is located in a rural area (as defined in section 
1886(d)(2)(D) of the Act) or is treated as being located in a rural 
area under section 1886(d)(8)(E) of the Act;
     Has fewer than 51 beds (excluding beds in a distinct part 
psychiatric or rehabilitation unit) as reported in its most recent cost 
report;
     Provides 24-hour emergency care services; and
     Is not designated or eligible for designation as a CAH 
under section 1820 of the Act.
    Section 410A(a)(4) of Public Law 108-173 specified that the 
Secretary was to select for participation no more than 15 rural 
community hospitals in rural areas of States that the Secretary 
identified as having low population densities. Using 2002 data from the 
U.S Census Bureau, we identified the 10 States with the lowest 
population density in which rural community hospitals were to be 
located in order to participate in the demonstration: Alaska, Idaho, 
Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota, 
Utah, and Wyoming (source: U.S. Census Bureau, Statistical Abstract of 
the United States: 2003).
    CMS originally solicited applicants for the demonstration in May 
2004; 13 hospitals began participation with cost reporting periods 
beginning on or after October 1, 2004. In 2005, 4 of these 13 hospitals 
withdrew from the program and converted to CAH status. This left nine 
hospitals participating at that time. In 2008, we announced a 
solicitation for up to six additional hospitals to participate in the 
demonstration program. Four additional hospitals were selected to 
participate under this solicitation. These four additional hospitals 
began under the demonstration payment methodology with the hospital's 
first cost reporting period starting on or after July 1, 2008. At that 
time, 13 hospitals were participating in the demonstration.
    Five hospitals (3 of the hospitals were among the 13 hospitals that 
were original participants in the demonstration program and 2 of the 
hospitals were among the 4 hospitals that began the demonstration 
program in 2008) withdrew from the demonstration program during CYs 
2009 and 2010. (Three of these hospitals indicated that they would be 
paid more for Medicare inpatient hospital services under the rebasing 
option allowed under the SCH methodology provided for under section 122 
of the Medicare Improvements for Patients and Providers Act of 2008 
(Pub. L. 110-275). One hospital restructured to become a CAH, and one 
hospital closed.) In CY 2011, one hospital that was among the original 
set of hospitals that participated in the demonstration withdrew from 
the demonstration. These actions left seven of the originally 
participating hospitals (that is, hospitals that were selected to 
participate in either 2004 or 2008) participating in the demonstration 
program as of June 1, 2011.
    Sections 3123 and 10313 of the Affordable Care Act (Pub. L. 111-
148) amended section 410A of Public Law 108-173, changing the rural 
community hospital demonstration program in several ways. First, the 
Secretary is required to conduct the demonstration program for an 
additional 5-year period, to begin on the date immediately following 
the last day of the initial 5-year period. Further, the Affordable Care 
Act requires, in the case of a rural community hospital that is 
participating in the demonstration program as of the last day of the 
initial 5-year period, the Secretary to provide for the continued 
participation of such rural hospital in the demonstration program 
during the 5-year extension period, unless the hospital makes an 
election to discontinue participation.
    In addition, the Affordable Care Act provides that, during the 5-
year extension period, the Secretary shall expand the number of States 
with low population densities determined by the Secretary to 20. 
Further, the Secretary is required to use the same criteria and data 
that the Secretary used to determine the States for the initial 5-year 
period. The Affordable Care Act also allows not more than 30 rural

[[Page 24516]]

community hospitals in such States to participate in the demonstration 
program during the 5-year extension period.
    We published a solicitation for applications for additional 
participants in the rural community hospital demonstration program in 
the Federal Register on August 30, 2010 (75 FR 52960). Applications 
were due on October 14, 2010. The 20 States with the lowest population 
density that were eligible for the demonstration program are: Alaska, 
Arizona, Arkansas, Colorado, Idaho, Iowa, Kansas, Maine, Minnesota, 
Mississippi, Montana, Nebraska, Nevada, New Mexico, North Dakota, 
Oklahoma, Oregon, South Dakota, Utah, and Wyoming (source: U.S. Census 
Bureau, Statistical Abstract of the United States: 2003). We approved 
19 new hospitals for participation in the demonstration program. We 
determined that each of these new hospitals would begin participating 
in the demonstration with its first cost reporting period beginning on 
or after April 1, 2011.
    Three of these 19 hospitals declined participation prior to the 
start of the cost reporting periods for which they would have begun the 
demonstration. In addition to the 7 hospitals that were selected in 
either 2004 or 2008, the new selection led to a total of 23 hospitals 
in the demonstration. During CY 2013, one additional hospital among the 
set selected in 2011 withdrew from the demonstration, similarly citing 
a relative financial advantage to returning to the customary SCH 
payment methodology, which left 22 hospitals participating in the 
demonstration.
    In addition, section 410A(c)(2) of Public Law 108-173 required 
that, in conducting the demonstration program under this section, the 
Secretary must ensure that the aggregate payments made by the Secretary 
do not exceed the amount which the Secretary would have paid if the 
demonstration program under this section was not implemented. This 
requirement is commonly referred to as ``budget neutrality.'' 
Generally, when we implement a demonstration program on a budget 
neutral basis, the demonstration program is budget neutral in its own 
terms; in other words, the aggregate payments to the participating 
hospitals do not exceed the amount that would be paid to those same 
hospitals in the absence of the demonstration program. Typically, this 
form of budget neutrality is viable when, by changing payments or 
aligning incentives to improve overall efficiency, or both, a 
demonstration program may reduce the use of some services or eliminate 
the need for others, resulting in reduced expenditures for the 
demonstration program's participants. These reduced expenditures offset 
increased payments elsewhere under the demonstration program, thus 
ensuring that the demonstration program as a whole is budget neutral or 
yields savings. However, the small scale of this demonstration program, 
in conjunction with the payment methodology, makes it extremely 
unlikely that this demonstration program could be viable under the 
usual form of budget neutrality.
    Specifically, cost-based payments to participating small rural 
hospitals are likely to increase Medicare outlays without producing any 
offsetting reduction in Medicare expenditures elsewhere. Therefore, a 
rural community hospital's participation in this demonstration program 
is unlikely to yield benefits to the participant if budget neutrality 
were to be implemented by reducing other payments for these same 
hospitals.
    In the past 11 IPPS final rules, spanning the period for which the 
demonstration program has been implemented, we have adjusted the 
national inpatient PPS rates by an amount sufficient to account for the 
added costs of this demonstration program, thus applying budget 
neutrality across the payment system as a whole rather than merely 
across the participants in the demonstration program. As we discussed 
in the FYs 2005 through 2015 IPPS final rules (69 FR 49183; 70 FR 
47462; 71 FR 48100; 72 FR 47392; 73 FR 48670; 74 FR 43922, 75 FR 50343, 
76 FR 51698, 77 FR 53449, 78 FR 50740, and 79 FR 50141, respectively), 
we believe that the language of the statutory budget neutrality 
requirements permits the agency to implement the budget neutrality 
provision in this manner.
    In general terms, in each of these previous years, we used 
available cost reports for the participating hospitals to derive an 
estimate of the additional costs attributable for the demonstration. 
Prior to FY 2013, we used finalized, or settled, cost reports, as 
available, and ``as submitted'' cost reports for hospitals for which 
finalized cost reports were not available. Annual market basket 
percentage increase amounts provided by the CMS Office of the Actuary 
reflecting the growth in the prices of inputs for inpatient hospitals 
were applied to these cost amounts. In the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53452), we used ``as submitted'' cost reports (for cost 
reporting periods ending in CY 2010) for each hospital participating in 
the demonstration in estimating the costs of the demonstration. In 
addition, in FY 2013, we incorporated different update factors (the 
market basket percentage increase and the applicable percentage 
increase, as applicable, to several years of data as opposed to solely 
using the market basket percentage increase) for the calculation of the 
budget neutrality offset amount. Finally, in each of the previous 
years, an annual update factor provided by the CMS Office of the 
Actuary reflecting growth in the volume of inpatient operating services 
also was applied. For the budget neutrality calculations in the IPPS 
final rules for FYs 2005 through 2011, the annual volume adjustment 
applied was 2 percent; for the IPPS final rules for FYs 2012, 2013, 
2014, and 2015, it was 3 percent. For a detailed discussion of our 
budget neutrality offset calculations, we refer readers to the IPPS 
final rule applicable to the fiscal year involved.
    In general, for FYs 2005 through 2009, we based the budget 
neutrality offset estimate on the estimated cost of the demonstration 
in an earlier given year. For these periods, we derived that estimated 
cost by subtracting the estimated amount that would otherwise be paid 
without the demonstration in an earlier given year from the estimated 
amount for the same year that would be paid under the demonstration 
under the reasonable cost-based methodology authorized by section 410A 
of Public Law 108-173. The reasonable cost-based methodology authorized 
by section 410A of Public Law 108-173, as amended, is hereafter 
referred to as the ``reasonable cost methodology.'' (We ascertained the 
estimated amount that would be paid in an earlier given year under the 
reasonable cost methodology and the estimated amount that would 
otherwise be paid without the demonstration in an earlier given year 
from ``as submitted'' cost reports that were submitted by the hospitals 
prior to the inception of the demonstration.) We then updated the 
estimated cost described above to the current year by multiplying it by 
the market basket percentage increases applicable to the years involved 
and the applicable annual volume adjustment. For the FY 2010 IPPS/RY 
2010 LTCH PPS final rule, data from finalized cost reports reflecting 
the participating hospitals' experience under the demonstration were 
available. Specifically, the finalized cost reports for the first 2 
years of the demonstration, that is, cost reports for cost reporting 
years beginning in FYs 2005 and 2006 (CYs 2004, 2005, and 2006) were 
available. These data showed that the actual costs

[[Page 24517]]

of the demonstration for these years exceeded the amounts originally 
estimated in the respective final rules for the budget neutrality 
adjustment. In the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we 
included in the budget neutrality offset amount an amount in addition 
to the estimate of the demonstration costs in that fiscal year. This 
additional amount was based on the amount that the costs of the 
demonstration for FYs 2005 and 2006 exceeded the budget neutrality 
offset amounts finalized in the IPPS rules applicable for those years.
    Following upon the FY 2010 IPPS/RY 2010 LTCH PPS final rule, we 
continued to propose a methodology for calculating the budget 
neutrality offset amount to account for both the estimated 
demonstration costs in the upcoming fiscal year and an amount by which 
the actual demonstration costs corresponding to an earlier, given year 
(which would be known once finalized cost reports became available for 
that year) exceeded the budget neutrality offset amount finalized in 
the corresponding year's IPPS final rule. However, we noted in the FYs 
2011, 2012, and 2013 IPPS final rules that, because of a delay 
affecting the settlement process for cost reports for IPPS hospitals 
occurring on a larger scale than merely for the demonstration, we were 
unable to finalize this component of the budget neutrality offset 
amount accounting for the amount by which the actual demonstration 
costs in a given year exceeded the budget neutrality offset amount 
finalized in the corresponding year's IPPS final rule for cost reports 
of demonstration hospitals dating to those beginning in FY 2007.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53449 through 
53453), we adopted changes to the methodology for calculating the 
budget neutrality offset amount in an effort to further improve and 
refine the methodology. We noted that the revised methodology varied, 
in part, from the methodology finalized in the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51698 through 51705). We refer readers to the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53449 through 53453) for a detailed 
discussion of the methodology we used for FY 2013. We noted that, 
although we made changes to certain aspects of the budget neutrality 
offset amount calculation for FY 2013, several core components of the 
methodology remained unchanged. For example, we continued to include in 
the budget neutrality offset amount the estimate of the demonstration 
costs for the upcoming fiscal year and the amount by which the actual 
demonstration costs corresponding to an earlier year (which would be 
determined once we have finalized cost reports for that year) exceeded 
the budget neutrality offset amount finalized in the corresponding 
year's IPPS final rule.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50739 through 
50744), we determined the final budget neutrality offset amount to be 
applied to the FY 2014 IPPS rates to be $52,589,741. This amount was 
comprised of two distinct components: (1) The final resulting 
difference between the estimated reasonable cost amount to be paid 
under the demonstration to the 22 participating hospitals in FY 2014 
for covered inpatient hospital services, and the estimated amount that 
would otherwise be paid to such hospitals in FY 2014 without the 
demonstration (this amount was $46,549,861); and (2) the amount by 
which the actual costs of the demonstration for FY 2007, as shown in 
the finalized cost reports for the hospitals that participated in the 
demonstration during FY 2007, exceeded the budget neutrality offset 
amount that was finalized in the FY 2007 IPPS final rule (this amount, 
$6,039,880, was derived from finalized cost reports for cost reporting 
periods beginning in FY 2007 for the 9 hospitals that participated in 
the demonstration during that year).
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50141 through 
50145), we stated the methodology for determining the budget neutrality 
adjustment factor to be applied to the FY 2015 national IPPS payment 
rates as follows.
    Step 1: For each of the participating hospitals, we identified the 
general reasonable cost amount calculated under the reasonable cost 
methodology for covered inpatient hospital services (as indicated on 
the ``as submitted'' cost report for the hospital's cost reporting 
period ending in CY 2012). Because ``as submitted'' cost reports ending 
in CY 2012 were the most recent available cost reports, we believe they 
were an accurate predictor of the costs of the demonstration in FY 
2015.
    Because section 410A of Public Law 108-173 stipulates swing-bed 
services are to be included among the covered inpatient hospital 
services for which the demonstration payment methodology applies, we 
included the cost of these services, as reported on the cost reports 
for the hospitals that provide swing-bed services, within the general 
total estimated FY 2012 reasonable cost amount for covered inpatient 
hospital services under the demonstration. As indicated above, we used 
``as submitted'' cost reports for the hospital's cost reporting period 
ending in CY 2012 for this calculation.
    We summed the two above-referenced amounts to calculate the general 
total estimated FY 2012 reasonable cost amount for covered inpatient 
hospital services for all participating hospitals.
    We multiplied this sum (that is, the general total estimated FY 
2012 reasonable cost amount for covered inpatient hospital services for 
all participating hospitals) by the FY 2013, FY 2014, and FY 2015 IPPS 
market basket percentage increases, which are formulated by the CMS 
Office of the Actuary. We then multiplied the product of the general 
total estimated FY 2012 reasonable cost amount for all participating 
hospitals and the market basket percentage increases applicable to the 
years involved by a 3-percent annual volume adjustment for FYs 2013 
through 2015--the result was the general total estimated FY 2015 
reasonable cost amount for covered inpatient hospital services for all 
participating hospitals.
    We used the IPPS market basket percentage increases because we 
believe that these update factors appropriately indicate the trend of 
increase in inpatient hospital operating costs under the reasonable 
cost methodology for the years involved. The 3-percent annual volume 
adjustment was stipulated by the CMS Office of the Actuary and was used 
because it is intended to reflect the tendency of hospitals' inpatient 
caseloads to increase. Because inpatient caseloads for small hospitals 
may fluctuate, we incorporated into the estimate of demonstration costs 
a factor to allow for a potential increase in inpatient hospital 
services.
    Step 2: For each of the participating hospitals, we identified the 
general estimated amount that would otherwise be paid in FY 2012 under 
applicable Medicare payment methodologies for covered inpatient 
hospital services (as indicated on the ``as submitted'' cost report for 
cost reporting periods ending in CY 2012) if the demonstration had not 
been implemented. Similarly, as in Step 1, for the hospitals that 
provide swing-bed services, we identified the estimated amount that 
generally would otherwise be paid for these services and included it in 
the total FY 2012 general estimated amount that would otherwise be paid 
for covered inpatient hospital services without the demonstration. We 
summed these two amounts to calculate the estimated FY 2012 total 
payments that generally would otherwise be paid for covered inpatient 
hospital services for all participating hospitals without the 
demonstration.

[[Page 24518]]

    We multiplied the above amount (that is, the estimated FY 2012 
total payments that generally would otherwise be paid for covered 
inpatient hospital services for all participating hospitals without the 
demonstration) by the FYs 2013 through 2015 IPPS applicable percentage 
increases. This methodology differs from Step 1, in which we applied 
the market basket percentage increases to the sum of the hospitals' 
general total FY 2012 estimated reasonable cost amount for covered 
inpatient hospital services. We believe that the IPPS applicable 
percentage increases are appropriate factors to update the estimated 
amounts that generally would otherwise be paid without the 
demonstration. This is because IPPS payments would constitute the 
majority of payments that would otherwise be made without the 
demonstration and the applicable percentage increase is the factor used 
under the IPPS to update the inpatient hospital payment rates. 
Hospitals participating in the demonstration would be participating 
under the IPPS payment methodology if they were not in the 
demonstration. Then we multiplied the product of the estimated FY 2012 
total payments that generally would otherwise be made without the 
demonstration and the IPPS applicable percentage increases for the 
years involved by a 3-percent annual volume adjustment for FYs 2013 
through 2015. The result represented the general total estimated FY 
2015 costs that would otherwise be paid without the demonstration for 
covered inpatient hospital services to the participating hospitals.
    Step 3: We subtracted the amount derived in Step 2 (representing 
the sum of estimated amounts that generally would otherwise be paid to 
the participating hospitals for covered inpatient hospital services for 
FY 2015 if the demonstration were not implemented) from the amount 
derived in Step 1 (representing the sum of the estimated reasonable 
cost amount that generally would be paid under the demonstration to all 
participating hospitals for covered inpatient hospital services for FY 
2015). For the FY 2015 IPPS/LTCH PPS final rule, the resulting 
difference was $54,177,144 (79 FR 50145). This estimated amount was 
based on the specific assumptions identified regarding the data sources 
used, that is, ``as submitted'' recently available cost reports.
    Also, in the FY 2015 IPPS/LTCH PPS final rule, we calculated the 
amount by which the actual costs of the demonstration in FY 2008 (that 
is, the costs of the demonstration for the 10 hospitals that 
participated in FY 2008, as shown in these hospitals' finalized cost 
reports for the cost report period beginning in that fiscal year), 
exceeded the budget neutrality offset amount that was finalized in the 
FY 2008 IPPS final rule. This amount, calculated for the FY 2015 final 
rule, was $10,389,771 (79 FR 50145).
    Therefore, the total budget neutrality offset amount applied to the 
FY 2015 IPPS rates was $64,566,915. This was the sum of two separate 
components: (1) The difference between the total estimated FY 2015 
reasonable cost amount to be paid under the demonstration to the 22 
participating hospitals for covered inpatient hospital services, and 
the total estimated amount that would otherwise be paid to the 
participating hospitals in FY 2015 without the demonstration 
($54,177,144); and (2) the amount by which the actual costs of the 
demonstration for FY 2008 (as shown in the finalized cost reports for 
cost reporting periods beginning in FY 2008 for the hospitals that 
participated in the demonstration during FY 2008) exceed the budget 
neutrality offset amount that was finalized in the FY 2008 IPPS final 
rule ($10,389,771).
2. Proposed FY 2016 Budget Neutrality Offset Amount
    In this FY 2016 IPPS/LTCH PPS proposed rule, in general, we are 
proposing to use the established methodology used in FY 2015 (as 
discussed earlier), with some modifications as discussed below, for 
determining the budget neutrality offset amount to be applied to the FY 
2016 national IPPS rates to reflect the costs of the demonstration. We 
are proposing to use ``as submitted'' cost reports ending in CY 2013 as 
the basis for estimating the reasonable cost amounts for covered 
services under the demonstration, as well as the amounts that would be 
paid absent the demonstration. As in previous years' rules, we believe 
that because these are the most recent available cost reports, they 
will be an accurate predictor of these amounts.
    Although the proposed methodology for FY 2016 is similar to that 
for the past several rules, we note that the demonstration will have 
begun to phase out by the beginning of FY 2016, and because of this, we 
believe additional calculations would be appropriate. The 7 
``originally participating hospitals,'' that is, those hospitals that 
began the demonstration between 2005 and 2009, will have ended their 
participation in the 5-year extension period authorized by the 
Affordable Care Act prior to the start of FY 2016. Therefore, we are 
proposing that the financial experience of these hospitals would not 
factor into the estimated reasonable cost amount and the estimated 
amounts that would otherwise be paid without the demonstration for FY 
2016.
    The participation period for the 15 hospitals that entered the 
demonstration following upon the Affordable Care Act amendments and 
that are still participating in the demonstration will end on a rolling 
basis according to the end dates of the hospitals' cost report periods, 
respectively, from April 30, 2016, through December 31, 2016. As 
further discussed below, our proposed methodology for estimating the 
reasonable cost amounts for covered inpatient hospital services under 
the demonstration, as well as the amounts that would otherwise be paid 
without the demonstration, would reflect the fact that some of the 
hospitals within this cohort will participate in the demonstration for 
only a fraction of the 12 months in FY 2016. Eleven of these 15 
hospitals are scheduled to end the demonstration on or before September 
30, 2016; eight of these 11 hospitals are scheduled to end the 
demonstration prior to September 30, 2016.
    For each of these 8 hospitals, we are proposing that the FY 2016 
estimated reasonable cost amount and the estimated amount that would 
otherwise be paid without the demonstration derived from the ``as 
submitted'' cost reports for cost reporting periods ending in CY 2013 
be prorated according to the ratio of the number of months between 
October 1, 2015 and the end of the hospital's cost reporting period in 
relation to the entire 12-month period. (For example, if a hospital's 
cost reporting period end date is June 30, 2016, the factor to be 
multiplied by the estimated reasonable cost amount and the estimated 
amount that would otherwise be paid without the demonstration from the 
calendar year end 2013 cost report is 0.75.) For the 7 hospitals that 
would end the demonstration on either September 30, 2016 or December 
31, 2016, estimates of these amounts would correspond to the amounts 
indicated in the calendar year end 2013 cost reports.
    We note that the 7 hospitals that started the demonstration between 
FYs 2005 and 2009 also will have ended their participation on a rolling 
basis during FY 2015. In the FY 2015 IPPS/LTCH PPS final rule, in 
accordance with the policy we finalized in the FY 2015 IPPS/LTCH PPS 
final rule, we based the estimate of the cost of the demonstration for 
FY 2015 on the financial experience as indicated on these hospitals' CY 
2012 ``as submitted'' cost reports (as discussed earlier) without 
making any

[[Page 24519]]

adjustment to reflect the fact that hospitals would be ending at 
different points during FY 2015. We believe this methodology was 
reasonable because only 5 hospitals are ending their participation in 
the demonstration before September 30, 2015, out of the 22 hospitals on 
which the estimate of the cost of the demonstration for that year was 
based. Furthermore, as discussed previously, the methodology stated in 
this and previous rules for determining the costs of the demonstration 
in a given fiscal year entails the comparison of the actual costs of 
the demonstration as determined from finalized cost reports for that 
fiscal year (when they are available) to the estimated amount 
identified for that fiscal year in the corresponding fiscal year's 
final rule. Consistent with this policy, this second step will be used 
to reconcile any differences between the estimated and actual 
demonstration costs for FY 2015 once finalized cost reports for cost 
reporting periods beginning in FY 2015 are available. Although we 
believe that our methodology for estimating costs for FY 2015 was 
reasonable, for FY 2016, we are proposing a more refined methodology to 
estimate the costs of the demonstration; that is, one that entails 
prorating, as discussed above, the estimated reasonable cost amount and 
the estimated amounts that would otherwise be paid without the 
demonstration as indicated on the ``as submitted'' cost reports for 
cost reporting periods ending in CY 2013 based on the number of months 
that each hospital will have participated in the demonstration during 
FY 2016.
    Similar to previous years, we are proposing the methodology for 
calculating the budget neutrality offset amount to proceed in several 
steps, as follows.
    Step 1: For each of the 15 hospitals that will be participating in 
the demonstration during FY 2016, we are proposing to identify the 
general reasonable cost amount calculated under the reasonable cost 
methodology for covered inpatient hospital services for the period of 
participation during FY 2016 based on ``as submitted'' cost reports 
ending in CY 2013. As discussed above, we are proposing that the basis 
of this estimate for each hospital scheduled to participate for part of 
FY 2016 would be the fraction of the number of months that the hospital 
will be participating out of the 12 months within FY 2016 multiplied by 
the reasonable cost amount for covered inpatient hospital services 
indicated on the ``as submitted'' cost report ending in CY 2013.
    Given that 8 hospitals will be participating in the demonstration 
for part of FY 2016, we believe that such a methodology of prorating 
represents an appropriate refinement to the methodology established in 
previous rules for estimating the reasonable cost amount paid under the 
demonstration because each hospital's relevant cost experience, 
respectively, which this estimated amount reflects, would apply for the 
specific number of months for which it is participating in the 
demonstration in FY 2016. We believe that applying the relevant 
fraction, representing the number of months that the hospital will have 
participated during FY 2016 out of the 12 months in the fiscal year, 
will lead to more precise estimates.
    Because section 410A of Public Law 108-173 stipulates that swing-
bed services are to be included among the covered inpatient hospital 
services for which the demonstration payment methodology applies, we 
are proposing to include the cost of these services, as reported on the 
``as submitted'' cost reports ending in CY 2013 for the hospitals that 
provided swing-bed services in CY 2013, similarly prorated by the 
fraction of the number of months that the hospital will be 
participating out of the total number of months within FY 2016.
    Similar to the methodology applied in FY 2015, we are proposing to 
sum the two above-referenced amounts to calculate the general total 
estimated FY 2013 reasonable cost amount for covered inpatient hospital 
services for all participating hospitals. Next, we are proposing to 
multiply the derived sum by the FY 2014, FY 2015, and FY 2016 IPPS 
market basket percentage increases, which are formulated by the CMS 
Office of the Actuary. For this proposed rule, the current estimate of 
the FY 2016 IPPS market basket percentage increase provided by the CMS 
Office of the Actuary is specified in section IV.A. of the preamble of 
this proposed rule. We are proposing to use the final FY 2016 IPPS 
market basket percentage increase in the final rule. We are proposing 
to multiply this product of the prorated reasonable cost amount for all 
15 hospitals (based on CY 2013 ``as submitted'' cost reports) and the 
market basket percentage increases applicable to the years involved by 
a 3-percent annual volume adjustment for FYs 2014, 2015, and 2016. The 
result is the proposed total estimated FY 2016 reasonable cost amount 
for covered inpatient hospital services for all hospitals participating 
in FY 2016.
    We are proposing to apply the IPPS market basket percentage 
increases applicable for FYs 2014 through 2016 to the reasonable cost 
amount derived from CY 2013 cost reports described earlier to model the 
estimated FY 2016 reasonable cost amount under the demonstration. We 
are proposing to use the IPPS market basket percentage increases 
because we believe that these update factors appropriately indicate the 
trend of increase in inpatient hospital operating costs under the 
reasonable cost methodology involved. The 3-percent annual volume 
adjustment was stipulated by the CMS Office of the Actuary and is being 
used because it is intended to reflect the tendency of hospitals' 
inpatient caseloads to increase. Because inpatient caseloads for small 
hospitals may fluctuate, we are proposing to incorporate into the 
estimate of demonstration costs a factor to allow for a potential 
increase in inpatient hospital services.
    Step 2: For each of the 15 hospitals that will be participating in 
FY 2016, we are proposing to identify the general estimated amount that 
would otherwise be paid in FY 2016 under applicable payment 
methodologies for covered inpatient hospital services (as indicated on 
the ``as submitted'' cost report for cost reporting periods ending in 
CY 2013) if the demonstration was not implemented. Similar to Step 1, 
we are proposing that the basis of this estimate for each hospital 
participating for part of FY 2016 would be the fraction of the number 
of months that the hospital will be participating out of the 12 months 
within FY 2016 multiplied by the estimated amount that would otherwise 
be paid for these services as indicated on the ``as submitted'' cost 
report ending in CY 2013. We believe that such a methodology of 
prorating represents an appropriate refinement to the methodology 
established in previous rules for estimating the amount that otherwise 
would be paid without the demonstration because each hospital's 
relevant costs and claims experiences, respectively, which this 
estimated amount reflects, would apply for the specific number of 
months for which it is participating in the demonstration in FY 2016. 
As we stated in Step 1, we believe that applying the relevant fraction, 
representing the number of months that the hospital will have 
participated during FY 2016 out of the 12 months in the fiscal year, 
will lead to more precise estimates.
    Similarly, as in Step 1, for the hospitals that provide swing-bed 
services, we are proposing to include the amount that would otherwise 
be paid for these services without the demonstration, as reported on 
the ``as

[[Page 24520]]

submitted'' cost reports ending in CY 2013 for the hospitals that 
provided swing-bed services in CY 2013. We are proposing to prorate, as 
appropriate, the estimated amount that would otherwise be paid for 
these services (as indicated on the ``as submitted'' cost report for 
cost reporting periods ending in CY 2013) by the fraction of the number 
of months that the hospital will be participating in FY 2016 out of the 
total number of months within FY 2016, and include this amount in the 
total FY 2013 general estimated amount that would otherwise be paid for 
covered inpatient hospital services without the demonstration.
    Similar to the methodology applied in FY 2015, we are proposing to 
sum these two amounts and multiply the derived sum by the FYs 2014, 
2015, and 2016 IPPS applicable percentage increases. For this proposed 
rule, the current estimate of the FY 2016 IPPS applicable percentage 
increase is specified in section IV.A. of the preamble of this proposed 
rule. (We are proposing to use the final FY 2016 applicable percentage 
increase in the final rule.) This methodology differs from Step 1, in 
which we are proposing to apply the IPPS market basket percentage 
increases to the sum of the hospitals' general total FY 2013 estimated 
reasonable cost amount for covered inpatient hospital services. We 
believe that the IPPS applicable percentage increases are appropriate 
update factors to estimate the amounts that would generally otherwise 
be paid without the demonstration. This is because IPPS payments would 
constitute the majority of payments that would otherwise be made 
without the demonstration and the applicable percentage increase is the 
factor used under the IPPS to update the inpatient hospital payment 
rates. We are proposing then to multiply this product by a 3-percent 
annual volume adjustment for FYs 2014, 2015, and 2016. The result 
represents the proposed general total estimated FY 2016 amount that 
would otherwise be paid for covered inpatient hospital services without 
the demonstration to the hospitals that would be participating in FY 
2016.
    Step 3: We are proposing to subtract the amount derived in Step 2 
(representing the sum of estimated amounts that generally would 
otherwise be paid to the participating hospitals for covered inpatient 
hospital services for FY 2016 if the demonstration had not been 
implemented) from the amount derived in Step 1 (representing the sum of 
the estimated reasonable cost amount that generally would be paid under 
the demonstration to all participating hospitals for covered inpatient 
hospital services for FY 2016). We are proposing that the resulting 
difference would represent one component of the estimated amount for 
which an adjustment to the national IPPS rates would be calculated (as 
further discussed below).
    For this proposed rule, the resulting difference is $26,195,949. 
This estimated amount is based on the specific assumptions identified 
regarding the data sources used, that is, ``as submitted'' recently 
available cost reports. If updated data become available prior to the 
FY 2016 IPPS/LTCH PPS final rule, we would use them to the extent 
appropriate to estimate the costs for the demonstration program in FY 
2016. Therefore, the estimated budget neutrality offset amount may 
change in the final rule, depending on the availability of updated 
data.
    Step 4: We are proposing to include in the budget neutrality offset 
amount the amount by which the actual demonstration costs corresponding 
to an earlier given year (which would be determined once we have 
finalized cost reports for that year) differs from the budget 
neutrality offset amount finalized in the corresponding year's IPPS 
final rule. (In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50145), we 
calculated the amount by which the actual costs of the demonstration in 
FY 2008 exceeded the budget neutrality offset amount that was finalized 
in the FY 2008 IPPS final rule. The corresponding differences for FYs 
2005, 2006, and 2007 were identified and included in the budget 
neutrality offset amounts in previous years' IPPS final rules.) 
Currently, finalized cost reports for cost reporting periods beginning 
in FY 2009 are available for the 10 hospitals that completed a cost 
report period starting in FY 2009. These cost reports have been issued 
by the MACs as finalized, and they have been subject to review 
processes specific to the calculations for cost-based payment as 
determined by the payment methodology for the demonstration. We note 
that CMS has issued a notice of reopening for several of these cost 
reports pertaining to an issue that affects hospitals nationwide. 
However, it is not yet known if, or to what extent, the calculations 
for budget neutrality under the demonstration would be affected in the 
event of a reopening of these cost reports. Until such a determination 
is made, we believe that it would be appropriate to use these cost 
reports this year for our calculations under Step 4 for FY 2016 in 
order to take into account the actual costs of the demonstration for FY 
2009 as soon as possible and to enhance the accuracy of the budget 
neutrality offset calculation.
    Therefore, in this proposed rule, we are identifying the difference 
between the total cost of the demonstration as indicated on these 
finalized FY 2009 cost reports and the budget neutrality offset amount 
that was identified in the FY 2009 IPPS final rule, and we are 
proposing to adjust the current year's budget neutrality offset amount 
by that difference. If there is a reopening that necessitates a 
recalculation for any of these reports, we would conduct another 
calculation once the affected cost reports are revised and finalized to 
determine the difference between the cost of the demonstration as 
reflected on the revised and finalized cost reports and the amount that 
was included in the budget neutrality offset amount for FY 2009 as 
identified in the FY 2009 IPPS final rule (taking into account any 
amount already included in the finalized budget neutrality offset 
amount in the FY 2016 IPPS/LTCH PPS final rule that reflects an 
adjustment based on FY 2009 cost reports). If finalized cost reports 
for demonstration hospitals that participated in FY 2010 or FY 2011 are 
available prior to the FY 2016 IPPS/LTCH PPS final rule, we intend to 
adjust the budget neutrality offset amount for FY 2016 for any amounts 
by which the finalized costs of the demonstration for the year (FY 2010 
or FY 2011) differ from the amounts included in the budget neutrality 
offset amount as finalized in the respective year's IPPS final rule 
that indicate the estimated cost of the demonstration for that fiscal 
year.
    As further discussed below, we note that, for this proposed rule, 
Step 4 would result in the amount indicating the actual cost of the 
demonstration for FY 2009 (determined from the current finalized FY 
2009 cost reports described in Step 4) being less than the amount that 
was originally identified in the FY 2009 IPPS final rule as the 
estimated cost of the demonstration. Therefore, we are proposing to 
include that component as a negative adjustment to the budget 
neutrality offset amount for the current fiscal year (as explained 
below).
    Step 5: The total budget neutrality offset amount that we are 
proposing to apply in determining the budget neutrality adjustment to 
the FY 2016 IPPS rates would use the sum of the amounts derived in 
Steps 3 and 4. Each of these amounts represents a discrete calculation, 
reflecting the two-stage process of ensuring budget neutrality for the 
demonstration: (1) Estimating the costs of the demonstration 
prospectively

[[Page 24521]]

for the upcoming fiscal year from historical ``as submitted'' cost 
reports (Step 3), and (2) then retrospectively reconciling the 
difference between this estimate for a prior fiscal year and the actual 
costs as recorded on finalized cost reports for the specific fiscal 
year (Step 4).
    Therefore, for this FY 2016 LTCH/LTCH PPS proposed rule, we are 
proposing to incorporate the following components into the calculation 
of the total budget neutrality offset:
    (a) The amount, derived from Step 3, representing the difference 
between the sum of the estimated reasonable cost amounts that would be 
paid under the demonstration to participating hospitals for covered 
inpatient hospital services for FY 2016 and the sum of the estimated 
amounts that would generally be paid if the demonstration had not been 
implemented. This amount would be based on ``as submitted'' cost 
reports for cost reporting periods ending in CY 2013, and would be 
prorated according to the number of months that each hospital will have 
participated in the demonstration in FY 2016 out of the 12-month fiscal 
year period. This amount is $26,195,949.
    (b) The amount, as derived from Step 4, by which the actual costs 
of the demonstration for FY 2009 (as shown in the finalized cost 
reports for the 10 hospitals that completed a cost reporting period 
beginning in FY 2009) differ from the budget neutrality offset amount 
that was finalized in the FY 2009 IPPS final rule. Analysis of this set 
of cost reports shows that the budget neutrality offset amount that was 
finalized in the FY 2009 IPPS final rule exceeds the actual cost of the 
demonstration by $8,457,452.
    For FY 2016, the total budget neutrality offset amount that we are 
proposing to apply is: The amount determined under item (a) of Step 5 
($26,195,949) minus the amount determined under item (b) of Step 5 
($8,457,452) or $17,738,497. We are proposing to subtract the amount 
under item (b) from that under item (a) because the amount under item 
(b) represents the amount by which the budget neutrality offset 
finalized in the FY 2009 IPPS final rule exceeded the actual costs of 
the demonstration for FY 2009. Accordingly, we are proposing to reduce 
the budget neutrality offset amount for FY 2016 by that amount.
    If updated data become available prior to the FY 2016 IPPS/LTCH PPS 
final rule, we would use them to the extent appropriate to determine 
the budget neutrality offset amount for FY 2016. Therefore, the amount 
of the budget neutrality offset may change in the FY 2016 IPPS/LTCH PPS 
final rule based on the availability of updated data. In addition, 
similar to previous years, we are proposing that if finalized cost 
reports for all of the demonstration hospitals that participated in an 
applicable year (FY 2010 or FY 2011) are available prior to the FY 2016 
IPPS/LTCH PPS final rule, we would adjust the budget neutrality offset 
amount to reflect the difference between the actual cost of the 
demonstration for the year (FY 2010 or FY 2011) and the budget 
neutrality offset amount applicable to such year as finalized in the 
respective year's final rule, as explained in Step 4. The resulting 
total would be the amount for which an adjustment to the national IPPS 
rates would be made.
    We are inviting public comments on our proposals discussed above.
    Finally, we are considering whether to propose in future rulemaking 
that the calculation of the final costs of the demonstration for a 
fiscal year reflect that some of the participating hospitals would 
otherwise have been eligible for the payment adjustment for low-volume 
hospitals in that fiscal year if they had not participated in the 
demonstration. Our policy under the demonstration is that hospitals 
participating in the demonstration are not able to receive the low-
volume payment adjustment in addition to the reasonable cost-based 
payment authorized by section 410A of Public Law 108-173. We refer 
readers to CMS Change Request 7505, dated July 22, 2011, available on 
the CMS Web site at: http://www.cms.gov. Section 1886(d)(12) of the Act 
provides for a payment adjustment to account for the higher costs per 
discharge for low-volume hospitals under the IPPS, effective FY 2005 
(69 FR 49099 through 49102). We note that sections 3125 and 10314 of 
the Affordable Care Act provided for temporary changes in the 
qualifying criteria and payment adjustment for low-volume hospitals for 
FYs 2011 and 2012, which were further extended by subsequent 
legislation through March 31, 2015 (79 FR 49998 through 50001). These 
temporary changes increased the number of hospitals that are eligible 
to receive the low-volume hospital payment adjustment.
    To the extent a hospital would have received a low-volume hospital 
payment adjustment if it had not participated in the demonstration, we 
believe it would be reasonable to take this into account in future 
rulemaking in determining what the hospital would have otherwise been 
paid in an applicable year without the demonstration. Because this 
payment adjustment has not been factored into the estimation of 
payments that otherwise would have been paid under the demonstration, 
such a proposal would require detailed consideration of the data 
sources and methodology that would be used to determine which among the 
demonstration hospitals would have otherwise been eligible for the low-
volume payment adjustment and to estimate the amount of the adjustment. 
We are inviting public comments on this issue.

J. Proposed Changes to MS-DRGs Subject to the Postacute Care Transfer 
Policy (Sec.  412.4)

1. Background
    Existing regulations at Sec.  412.4(a) define discharges under the 
IPPS as situations in which a patient is formally released from an 
acute care hospital or dies in the hospital. Section 412.4(b) defines 
acute care transfers, and Sec.  412.4(c) defines postacute care 
transfers. Our policy set forth in Sec.  412.4(f) provides that when a 
patient is transferred and his or her length of stay is less than the 
geometric mean length of stay for the MS-DRG to which the case is 
assigned, the transferring hospital is generally paid based on a 
graduated per diem rate for each day of stay, not to exceed the full 
MS-DRG payment that would have been made if the patient had been 
discharged without being transferred.
    The per diem rate paid to a transferring hospital is calculated by 
dividing the full MS-DRG payment by the geometric mean length of stay 
for the MS-DRG. Based on an analysis that showed that the first day of 
hospitalization is the most expensive (60 FR 45804), our policy 
generally provides for payment that is twice the per diem amount for 
the first day, with each subsequent day paid at the per diem amount up 
to the full MS-DRG payment (Sec.  412.4(f)(1)). Transfer cases also are 
eligible for outlier payments. In general, the outlier threshold for 
transfer cases, as described in Sec.  412.80(b), is equal to the fixed-
loss outlier threshold for nontransfer cases (adjusted for geographic 
variations in costs), divided by the geometric mean length of stay for 
the MS-DRG, and multiplied by the length of stay for the case, plus 1 
day.
    We established the criteria set forth in Sec.  412.4(d) for 
determining which DRGs qualify for postacute care transfer payments in 
the FY 2006 IPPS final rule (70 FR 47419 through 47420). The 
determination of whether a DRG is subject to the postacute care 
transfer policy was initially based on the Medicare Version 23.0 
GROUPER (FY 2006) and data from the FY 2004

[[Page 24522]]

MedPAR file. However, if a DRG did not exist in Version 23.0 or a DRG 
included in Version 23.0 is revised, we use the current version of the 
Medicare GROUPER and the most recent complete year of MedPAR data to 
determine if the DRG is subject to the postacute care transfer policy. 
Specifically, if the MS-DRG's total number of discharges to postacute 
care equals or exceeds the 55th percentile for all MS-DRGs and the 
proportion of short-stay discharges to postacute care to total 
discharges in the MS-DRG exceeds the 55th percentile for all MS-DRGs, 
CMS will apply the postacute care transfer policy to that MS-DRG and to 
any other MS-DRG that shares the same base MS-DRG. In the preamble to 
the FY 2006 IPPS final rule (70 FR 47419), we stated that we will not 
revise the list of DRGs subject to the postacute care transfer policy 
annually unless we are making a change to a specific DRG.
    To account for MS-DRGs subject to the postacute care policy that 
exhibit exceptionally higher shares of costs very early in the hospital 
stay, Sec.  412.4(f) also includes a special payment methodology. For 
these MS-DRGs, hospitals receive 50 percent of the full MS-DRG payment, 
plus the single per diem payment, for the first day of the stay, as 
well as a per diem payment for subsequent days (up to the full MS-DRG 
payment (Sec.  412.4(f)(6)). For an MS-DRG to qualify for the special 
payment methodology, the geometric mean length of stay must be greater 
than 4 days, and the average charges of 1-day discharge cases in the 
MS-DRG must be at least 50 percent of the average charges for all cases 
within the MS-DRG. MS-DRGs that are part of an MS-DRG severity level 
group will qualify under the MS-DRG special payment methodology policy 
if any one of the MS-DRGs that share that same base MS-DRG qualifies 
(Sec.  412.4(f)(6)).
2. Proposed Changes to the Postacute Care Transfer MS-DRGs
    Based on our annual review of MS-DRGs, we have identified two 
proposed new MS-DRGs that we are proposing to include on the list of 
MS-DRGs subject to the postacute care transfer policy. As we discuss in 
section II.G. of the preamble of this proposed rule, in response to 
public comments and based on our analysis of FY 2014 MedPAR claims 
data, we are proposing to make changes to MS-DRGs, effective for FY 
2016.
    As discussed in section II.G.3.b. of the preamble of this proposed 
rule, we are proposing to modify the MS-DRG assignment of certain 
cardiovascular procedures currently assigned to MS-DRGs 246 
(Percutaneous Cardiovascular Procedures with Drug-Eluting Stent with 
MCC or 4+ Vessels/Stents), 247 (Percutaneous Cardiovascular Procedures 
with Drug-Eluting Stent without MCC), 248 (Percutaneous Cardiovascular 
Procedures with Non-Drug Eluting Stent with MCC or 4+ Vessels/Stents), 
249 (Percutaneous Cardiovascular Procedures with Non-Drug Eluting Stent 
without MCC), 250 (Percutaneous Cardiovascular Procedures without 
Coronary Artery Stent with MCC), and 251 (Percutaneous Cardiovascular 
Procedures without Coronary Artery Stent without MCC) to improve the 
clinical homogeneity of these MS-DRGs and reflect the resource cost of 
specialized equipment. We are proposing to create new MS-DRGs 273 and 
274 (Percutaneous Intracardiac Procedures with and without MCC, 
respectively) and to reassign the procedures performed within the heart 
chambers using intracardiac techniques from their current assignment in 
MS-DRGs 246 through 251 to the two proposed new MS-DRGs.
    To improve clinical coherence for the various cardiovascular 
procedures currently assigned to MS-DRGs 237 and 238 (Major 
Cardiovascular Procedures with and without MCC, respectively), as 
discussed in section II.G.3.e. of the preamble of this proposed rule, 
we also are proposing to delete MS-DRGs 237 and 238 and to create five 
new proposed MS-DRGs: Proposed new MS DRGs 268 and 269 (Aortic and 
Heart Assist Procedures Except Pulsation Balloon with MCC and without 
MCC, respectively) would contain the more complex, more invasive aortic 
and heart assist procedures currently assigned to MS-DRGs 237 and 238. 
Proposed new MS-DRGs 270 (Other Major Cardiovascular Procedures with 
MCC), 271 (Other Major Cardiovascular Procedures with CC), and 272 
(Other Major Cardiovascular Procedures without CC/MCC) would include 
the less complex, less invasive cardiovascular procedures currently 
assigned to MS-DRGs 237 and 238.
    In light of these proposed changes to the MS-DRGs for FY 2016, 
according to the regulations under Sec.  412.4(c), we evaluated these 
proposed MS-DRGs against the general postacute care transfer policy 
criteria using the FY 2014 MedPAR data. If an MS-DRG qualified for the 
postacute care transfer policy, we also evaluated that MS-DRG under the 
special payment methodology criteria according to regulations at Sec.  
412.4(f)(6). We continue to believe it is appropriate to reassess MS-
DRGs when proposing reassignment of procedures and/or diagnostic codes 
that would result in material changes to an MS-DRG. As a result of our 
review, we are proposing to update the list of MS-DRGs that are subject 
to the postacute care transfer policy to include the proposed new MS-
DRGs 273 and 274. Existing MS-DRGs 246 through 251 do not currently 
qualify for the postacute care transfer policy and would not meet the 
review criteria for FY 2016. Proposed new MS-DRGs 268 through 272 also 
would not qualify for postacute care transfer policy status.

                             Proposed List of MS-DRGs Subject to Review of Postacute Care Transfer Policy Status for FY 2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Percent of short-
                                                                                                         stay postacute
                                                                     Postacute care      Short-stay      care transfers
   Proposed new  MS-DRG        Proposed MS-DRG title       Total     transfers (55th   postacute care     to all cases    Postacute care transfer policy
                                                           cases       percentile:        transfers           (55th                   status
                                                                         1,395)                            percentile:
                                                                                                            7.8005%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
268.......................  Aortic and Heart Assist          4,464             2,178               268          * 6.0036  NO.
                             Procedures Except
                             Pulsation Balloon with MCC.
269.......................  Aortic and Heart Assist         19,382             3,617                 0               * 0  NO.
                             Procedures Except
                             Pulsation Balloon without
                             MCC.
270.......................  Other Major Cardiovascular      15,141             5,964               719          * 4.7487  NO.
                             Procedures with MCC.
271.......................  Other Major Cardiovascular      10,368             4,027               532          * 5.1312  NO.
                             Procedures with CC.
272.......................  Other Major Cardiovascular       4,785             * 880                54          * 1.1285  NO.
                             Procedures without CC/MCC.

[[Page 24523]]

 
273.......................  Percutaneous Intracardiac        6,602             2,654               646            9.7849  YES.
                             Procedures with MCC.
274.......................  Percutaneous Intracardiac       15,812             2,445               140          * 0.8854  YES.**
                             Procedures without MCC.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Indicates a current postacute care transfer policy criterion that the MS-DRG did not meet.
** As described in the policy at 42 CFR 412.4(d)(3)(ii)(D), MS-DRGs that share the same base MS-DRG will all qualify under the postacute care transfer
  policy if any one of the MS-DRGs that share that same base MS-DRG qualifies.

    Finally, we have determined that proposed new MS-DRGs 273 and 274 
also would meet the criteria for the special payment methodology. 
Therefore, we are proposing that the two proposed new MS-DRGs would be 
subject to the MS-DRG special payment methodology, effective FY 2016.

                Proposed List of MS-DRGs Subject to Review of Special Payment Policy for FY 2016
----------------------------------------------------------------------------------------------------------------
                                                                            50 percent of
Proposed new  MS-   Proposed MS-DRG    Geometric mean    Average charges   average charges    Special  payment
       DRG               Title         length of stay       of 1-day        for all cases       policy status
                                                           discharges       within MS-DRG
----------------------------------------------------------------------------------------------------------------
273.............  Percutaneous                     6.0           $67,126           $60,588  YES.
                   Intracardiac
                   Procedures with
                   MCC.
274.............  Percutaneous                     2.7                 0                 0  YES.*
                   Intracardiac
                   Procedures
                   without MCC.
----------------------------------------------------------------------------------------------------------------
* As described in the policy at 42 CFR 412.4(d)(6)(iv), MS-DRGs that share the same base MS-DRG will all qualify
  under the MS-DRG special payment policy if any one of the MS-DRGs that share that same base MS-DRG qualifies.

    The proposed postacute care transfer status and special payment 
policy status of these MS-DRGs are reflected in Table 5 associated with 
this proposed rule, which is listed in section VI. of the Addendum to 
this proposed rule and available via the Internet on the CMS Web site.

K. Short Inpatient Hospital Stays

    Over the past few years, stakeholders have expressed a variety of 
concerns related to Medicare policies on short inpatient hospital 
stays, long outpatient stays that include observation services, and 
Medicare policies with respect to when payment for short hospital stays 
is appropriate under Medicare Part A. CMS has taken steps to address 
such concerns. As we announced on April 1, 2015, CMS recovery auditors 
are not permitted to conduct patient status reviews for claims with 
dates of admission of October 1, 2013 through April 30, 2015.
    In addition, on December 30, 2014, we announced a number of changes 
to the Recovery Audit Program. Such modifications included changing the 
recovery auditor ``look-back period'' for patient status reviews to 6 
months from the date of service in cases where a hospital submits the 
claim within 3 months of the date that it provides the service. Several 
other program improvements were included in this announcement. We have 
established limits on additional documentation requests (ADRs) that are 
based on a hospital's compliance with Medicare rules, incrementally 
applied ADR limits for providers that are new to recovery auditor 
reviews, and diversified ADR limits across all types of claims for a 
certain provider. We also have established a requirement that recovery 
auditors must complete complex reviews within 30 days, and failure to 
do so will result in the loss of the recovery auditor's contingency 
fee. In addition, we will require recovery auditors to wait 30 days 
before sending a claim to the MAC for adjustment. This 30-day period 
will allow the provider to submit a discussion period request before 
the MAC makes any payment adjustments. These changes will be effective 
with the next Recovery Audit Program contract awards.
    Despite these planned alterations to the Recovery Audit Program, we 
note that hospitals and physicians continue to voice their concern with 
parts of the 2-midnight rule finalized in the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50943 through 50954). Therefore, we are considering 
this feedback carefully, as well as recent MedPAC recommendations, and 
expect to include a further discussion of the broader set of issues 
related to short inpatient hospital stays, long outpatient stays with 
observation services, and the related -0.2 percent IPPS payment 
adjustment in the CY 2016 hospital outpatient prospective payment 
system proposed rule that will be published this summer.

V. Proposed Changes to the IPPS for Capital-Related Costs

A. Overview

    Section 1886(g) of the Act requires the Secretary to pay for the 
capital-related costs of inpatient acute hospital services ``in 
accordance with a prospective payment system established by the 
Secretary.'' Under the statute, the Secretary has broad authority in 
establishing and implementing the IPPS for acute care hospital 
inpatient capital-related costs. The IPPS for capital-related costs was 
initially implemented in the Federal fiscal year (FY) 1992 IPPS final 
rule (56 FR 43358), in which we established a 10-year transition period 
to change the payment methodology for Medicare hospital inpatient 
capital-related costs from a reasonable cost-based methodology to a 
prospective methodology (based fully on the Federal rate).
    FY 2001 was the last year of the 10-year transition period 
established to phase in the IPPS for hospital inpatient

[[Page 24524]]

capital-related costs. For cost reporting periods beginning in FY 2002, 
capital IPPS payments are based solely on the Federal rate for almost 
all acute care hospitals (other than hospitals receiving certain 
exception payments and certain new hospitals). (We refer readers to the 
FY 2002 IPPS final rule (66 FR 39910 through 39914) for additional 
information on the methodology used to determine capital IPPS payments 
to hospitals both during and after the transition period.)
    The basic methodology for determining capital prospective payments 
using the Federal rate is set forth in Sec.  412.312 of the 
regulations. For the purpose of calculating capital payments for each 
discharge, the standard Federal rate is adjusted as follows:
    (Standard Federal Rate) x (DRG Weight) x (Geographic Adjustment 
Factor (GAF)) x (COLA for hospitals located in Alaska and Hawaii) x (1 
+ Capital DSH Adjustment Factor + Capital IME Adjustment Factor, if 
applicable).
    In addition, under Sec.  412.312(c), hospitals also may receive 
outlier payments under the capital IPPS for extraordinarily high-cost 
cases that qualify under the thresholds established for each fiscal 
year.

B. Additional Provisions

1. Exception Payments
    The regulations at Sec.  412.348 provide for certain exception 
payments under the capital IPPS. The regular exception payments 
provided under Sec.  412.348(b) through (e) were available only during 
the 10-year transition period. For a certain period after the 
transition period, eligible hospitals may have received additional 
payments under the special exceptions provisions at Sec.  412.348(g). 
However, FY 2012 was the final year hospitals could receive special 
exceptions payments. For additional details regarding these exceptions 
policies, we refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 
FR 51725).
    Under Sec.  412.348(f), a hospital may request an additional 
payment if the hospital incurs unanticipated capital expenditures in 
excess of $5 million due to extraordinary circumstances beyond the 
hospital's control. Additional information on the exception payment for 
extraordinary circumstances in Sec.  412.348(f) can be found in the FY 
2005 IPPS final rule (69 FR 49185 and 49186).
2. New Hospitals
    Under the capital IPPS, Sec.  412.300(b) of the regulations defines 
a new hospital as a hospital that has operated (under previous or 
current ownership) for less than 2 years and lists examples of 
hospitals that are not considered new hospitals. In accordance with 
Sec.  412.304(c)(2), under the capital IPPS a new hospital is paid 85 
percent of its allowable Medicare inpatient hospital capital-related 
costs through its first 2 years of operation, unless the new hospital 
elects to receive full prospective payment based on 100 percent of the 
Federal rate. We refer readers to the FY 2012 IPPS/LTCH PPS final rule 
(76 FR 51725) for additional information on payments to new hospitals 
under the capital IPPS.
3. Hospitals Located in Puerto Rico
    Section 412.374 of the regulations provides for the use of a 
blended payment amount for prospective payments for capital-related 
costs to hospitals located in Puerto Rico. Accordingly, under the 
capital IPPS, we compute a separate payment rate specific to Puerto 
Rico hospitals using the same methodology used to compute the national 
Federal rate for capital-related costs. In general, hospitals located 
in Puerto Rico are paid a blend of the applicable capital IPPS Puerto 
Rico rate and the applicable capital IPPS Federal rate. Capital IPPS 
payments to hospitals located in Puerto Rico are computed based on a 
blend of 25 percent of the capital IPPS Puerto Rico rate and 75 percent 
of the capital IPPS Federal rate. For additional details on capital 
IPPS payments to hospitals located in Puerto Rico, we refer readers to 
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51725).

C. Proposed Annual Update for FY 2016

    The proposed annual update to the capital PPS Federal and Puerto 
Rico-specific rates, as provided for at Sec.  412.308(c), for FY 2016 
is discussed in section III. of the Addendum to this proposed rule.
    We note that, in section II.D. of the preamble of this proposed 
rule, we present a discussion of the MS-DRG documentation and coding 
adjustment, including previously finalized policies and historical 
adjustments, as well as the recoupment adjustment to the standardized 
amounts under section 1886(d) of the Act that we are proposing for FY 
2016 in accordance with the amendments made to section 7(b)(1)(B) of 
Public Law 110-90 by section 631 of the ATRA. Because section 631 of 
the ATRA requires CMS to make a recoupment adjustment only to the 
operating IPPS standardized amount, we are not proposing a similar 
adjustment to the national or Puerto Rico capital IPPS rates (or to the 
operating IPPS hospital-specific rates or the Puerto Rico-specific 
standardized amount). This approach is consistent with our historical 
approach regarding the application of the recoupment adjustment 
authorized by section 7(b)(1)(B) of Public Law 110-90.

VI. Proposed Changes for Hospitals Excluded From the IPPS

    Certain hospitals excluded from a prospective payment system, 
including children's hospitals, 11 cancer hospitals, and hospitals 
located outside the 50 States, the District of Columbia, and Puerto 
Rico (that is, hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa) receive payment for 
inpatient hospital services they furnish on the basis of reasonable 
costs, subject to a rate-of-increase ceiling. A per discharge limit 
(the target amount as defined in Sec.  413.40(a) of the regulations) is 
set for each hospital based on the hospital's own cost experience in 
its base year, and updated annually by a rate-of-increase percentage. 
For each cost reporting period, the updated target amount is multiplied 
by total Medicare discharges during that period and applies as an 
aggregate upper limit (the ceiling as defined in Sec.  413.40(a)) of 
Medicare reimbursement for total inpatient operating costs for a 
hospital's cost reporting period. In accordance with Sec.  403.752(a) 
of the regulations, RNHCIs also are subject to the rate-of-increase 
limits established under Sec.  413.40 of the regulations discussed 
above.
    As explained in the FY 2006 IPPS final rule (70 FR 47396 through 
47398), beginning with FY 2006, we have used the percentage increase in 
the IPPS operating market basket to update the target amounts for 
children's hospitals, cancer hospitals, and RNHCIs. Consistent with 
Sec. Sec.  412.23(g), 413.40(a)(2)(ii)(A), and 413.40(c)(3)(viii), we 
also have used the percentage increase in the IPPS operating market 
basket to update the target amounts for short-term acute care hospitals 
located in the U.S. Virgin Islands, Guam, the Northern Mariana Islands, 
and American Samoa. As we finalized in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50156 through 50157), we will continue to use the 
percentage increase in the FY 2010-based IPPS operating market basket 
to update the target amounts for children's hospitals, cancer 
hospitals, RNHCIs, and short-term acute care hospitals located in the 
U.S. Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa for FY 2016 and

[[Page 24525]]

subsequent fiscal years. Accordingly, for FY 2016, the rate-of-increase 
percentage to be applied to the target amount for these children's 
hospitals, cancer hospitals, RNHCIs, and short-term acute care 
hospitals located in the U.S. Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa is the FY 2016 percentage increase 
in the FY 2010-based IPPS operating market basket.
    For this FY 2016 proposed rule, based on IHS Global Insight, Inc.'s 
2015 first quarter forecast, we estimate that the FY 2010-based IPPS 
operating market basket update for FY 2016 is 2.7 percent (that is, the 
estimate of the market basket rate-of-increase). Therefore, the FY 2016 
rate-of-increase percentage that would be applied to the FY 2015 target 
amounts in order to calculate the FY 2016 target amounts for children's 
hospitals, cancer hospitals, RNHCIs, and short-term acute care 
hospitals located in the U.S. Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa is 2.7 percent, in accordance with 
the applicable regulations at 42 CFR 413.40. We are proposing that if 
more recent data become available for the final rule, we would use them 
to calculate the IPPS operating market basket update for FY 2016.

VII. Proposed Changes to the Long-Term Care Hospital Prospective 
Payment System (LTCH PPS) for FY 2016

A. Background of the LTCH PPS

1. Legislative and Regulatory Authority
    Section 123 of the Medicare, Medicaid, and SCHIP (State Children's 
Health Insurance Program) Balanced Budget Refinement Act of 1999 (BBRA) 
(Pub. L. 106-113) as amended by section 307(b) of the Medicare, 
Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000 
(BIPA) (Pub. L. 106-554) provides for payment for both the operating 
and capital-related costs of hospital inpatient stays in long-term care 
hospitals (LTCHs) under Medicare Part A based on prospectively set 
rates. The Medicare prospective payment system (PPS) for LTCHs applies 
to hospitals that are described in section 1886(d)(1)(B)(iv) of the 
Act, effective for cost reporting periods beginning on or after October 
1, 2002.
    Section 1886(d)(1)(B)(iv)(I) of the Act defines a LTCH as ``a 
hospital which has an average inpatient length of stay (as determined 
by the Secretary) of greater than 25 days.'' Section 
1886(d)(1)(B)(iv)(II) of the Act also provides an alternative 
definition of LTCHs: Specifically, a hospital that first received 
payment under section 1886(d) of the Act in 1986 and has an average 
inpatient length of stay (LOS) (as determined by the Secretary of 
Health and Human Services (the Secretary)) of greater than 20 days and 
has 80 percent or more of its annual Medicare inpatient discharges with 
a principal diagnosis that reflects a finding of neoplastic disease in 
the 12-month cost reporting period ending in FY 1997.
    Section 123 of the BBRA requires the PPS for LTCHs to be a ``per 
discharge'' system with a diagnosis-related group (DRG) based patient 
classification system that reflects the differences in patient 
resources and costs in LTCHs.
    Section 307(b)(1) of the BIPA, among other things, mandates that 
the Secretary shall examine, and may provide for, adjustments to 
payments under the LTCH PPS, including adjustments to DRG weights, area 
wage adjustments, geographic reclassification, outliers, updates, and a 
disproportionate share adjustment.
    In the August 30, 2002 Federal Register, we issued a final rule 
that implemented the LTCH PPS authorized under the BBRA and BIPA (67 FR 
55954). For the initial implementation of the LTCH PPS (FYs 2003 
through FY 2007), the system used information from LTCH patient records 
to classify patients into distinct long-term care diagnosis-related 
groups (LTC-DRGs) based on clinical characteristics and expected 
resource needs. Beginning in FY 2008, we adopted the Medicare severity 
long-term care diagnosis-related groups (MS-LTC-DRGs) as the patient 
classification system used under the LTCH PPS. Payments are calculated 
for each MS-LTC-DRG and provisions are made for appropriate payment 
adjustments. Payment rates under the LTCH PPS are updated annually and 
published in the Federal Register.
    The LTCH PPS replaced the reasonable cost-based payment system 
under the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) 
(Pub. L. 97-248) for payments for inpatient services provided by a LTCH 
with a cost reporting period beginning on or after October 1, 2002. 
(The regulations implementing the TEFRA reasonable cost-based payment 
provisions are located at 42 CFR part 413.) With the implementation of 
the PPS for acute care hospitals authorized by the Social Security 
Amendments of 1983 (Pub. L. 98-21), which added section 1886(d) to the 
Act, certain hospitals, including LTCHs, were excluded from the PPS for 
acute care hospitals and were paid their reasonable costs for inpatient 
services subject to a per discharge limitation or target amount under 
the TEFRA system. For each cost reporting period, a hospital-specific 
ceiling on payments was determined by multiplying the hospital's 
updated target amount by the number of total current year Medicare 
discharges. (Generally, in this section VII. of the preamble of this 
proposed rule, when we refer to discharges, we describe Medicare 
discharges.) The August 30, 2002 final rule further details the payment 
policy under the TEFRA system (67 FR 55954).
    In the August 30, 2002 final rule, we provided for a 5-year 
transition period from payments under the TEFRA system to payments 
under the LTCH PPS. During this 5-year transition period, a LTCH's 
total payment under the PPS was based on an increasing percentage of 
the Federal rate with a corresponding decrease in the percentage of the 
LTCH PPS payment that is based on reasonable cost concepts, unless a 
LTCH made a one-time election to be paid based on 100 percent of the 
Federal rate. Beginning with LTCHs' cost reporting periods beginning on 
or after October 1, 2006, total LTCH PPS payments are based on 100 
percent of the Federal rate.
    In addition, in the August 30, 2002 final rule, we presented an in-
depth discussion of the LTCH PPS, including the patient classification 
system, relative weights, payment rates, additional payments, and the 
budget neutrality requirements mandated by section 123 of the BBRA. The 
same final rule that established regulations for the LTCH PPS under 42 
CFR part 412, subpart O, also contained LTCH provisions related to 
covered inpatient services, limitation on charges to beneficiaries, 
medical review requirements, furnishing of inpatient hospital services 
directly or under arrangement, and reporting and recordkeeping 
requirements. We refer readers to the August 30, 2002 final rule for a 
comprehensive discussion of the research and data that supported the 
establishment of the LTCH PPS (67 FR 55954).
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51733 through 51743) for a chronological summary of the main 
legislative and regulatory developments affecting the LTCH PPS through 
the annual update cycles prior to the FY 2014 rulemaking cycle. In 
addition, in this proposed rule, we discuss the provisions of the 
Pathway for SGR Reform Act of 2013 (Pub. L. 113-67), enacted on 
December 26, 2013, and the Protecting Access to Medicare Act of 2014 
(PAMA) (Pub. L. 113-97), enacted on March 27, 2014, both of which 
affect the LTCH

[[Page 24526]]

PPS. In section VII.B. of the preamble of this proposed rule, we 
discuss our proposals to implement the provisions of section 1206(a) of 
Public Law 113-67, which amended section 1886(m) of the Act by adding 
paragraph (6) and established, among other things, patient-level 
criteria for payments under the LTCH PPS for implementation beginning 
with FY 2016, and our proposed changes to the calculation of the 
greater than 25-day average length of stay criteria, consistent with 
the statute, in section VII.F. of the preamble of this proposed rule. 
In section VII.E. of the preamble of this proposed rule, we are 
proposing technical clarifications relating to our implementation of 
the new statutory moratoria on the establishment of new LTCHs and LTCH 
satellite facilities (subject to certain defined exceptions) and the 
new statutory moratorium on bed increases in existing LTCHs under 
section 1206(b)(2) of Public Law 113-67, as amended.
2. Criteria for Classification as an LTCH
a. Classification as an LTCH
    Under the regulations at Sec.  412.23(e)(1), to qualify to be paid 
under the LTCH PPS, a hospital must have a provider agreement with 
Medicare. Furthermore, Sec.  412.23(e)(2)(i), which implements section 
1886(d)(1)(B)(iv)(I) of the Act, requires that a hospital have an 
average Medicare inpatient length of stay of greater than 25 days to be 
paid under the LTCH PPS. Alternatively, Sec.  412.23(e)(2)(ii) states 
that, for cost reporting periods beginning on or after August 5, 1997, 
a hospital that was first excluded from the PPS in 1986 and can 
demonstrate that at least 80 percent of its annual Medicare inpatient 
discharges in the 12-month cost reporting period ending in FY 1997 have 
a principal diagnosis that reflects a finding of neoplastic disease 
must have an average inpatient length of stay for all patients, 
including both Medicare and non-Medicare inpatients, of greater than 20 
days.
b. Hospitals Excluded From the LTCH PPS
    The following hospitals are paid under special payment provisions, 
as described in Sec.  412.22(c) and, therefore, are not subject to the 
LTCH PPS rules:
     Veterans Administration hospitals.
     Hospitals that are reimbursed under State cost control 
systems approved under 42 CFR part 403.
     Hospitals that are reimbursed in accordance with 
demonstration projects authorized under section 402(a) of the Social 
Security Amendments of 1967 (Pub. L. 90-248) (42 U.S.C. 1395b-1) or 
section 222(a) of the Social Security Amendments of 1972 (Pub. L. 92-
603) (42 U.S.C. 1395b-1 (note)) (Statewide all-payer systems, subject 
to the rate-of-increase test at section 1814(b) of the Act).
     Nonparticipating hospitals furnishing emergency services 
to Medicare beneficiaries.
3. Limitation on Charges to Beneficiaries
    In the August 30, 2002 final rule, we presented an in-depth 
discussion of beneficiary liability under the LTCH PPS (67 FR 55974 
through 55975). This discussion was further clarified in the RY 2005 
LTCH PPS final rule (69 FR 25676). In keeping with those discussions, 
if the Medicare payment to the LTCH is the full LTC-DRG payment amount, 
consistent with other established hospital prospective payment systems, 
Sec.  412.507 currently provides that an LTCH may not bill a Medicare 
beneficiary for more than the deductible and coinsurance amounts as 
specified under Sec. Sec.  409.82, 409.83, and 409.87 and for items and 
services specified under Sec.  489.30(a). However, under the LTCH PPS, 
Medicare will only pay for days for which the beneficiary has coverage 
until the short-stay outlier (SSO) threshold is exceeded. If the 
Medicare payment was for a SSO case (Sec.  412.529), and that payment 
was less than the full LTC-DRG payment amount because the beneficiary 
had insufficient remaining Medicare days, the LTCH is currently also 
permitted to charge the beneficiary for services delivered on those 
uncovered days (Sec.  412.507). In light of our proposed implementation 
of section 1206(a) of Public Law 113-67, we now need to also address 
beneficiary charges in the context of the new site neutral payment 
rate. Therefore, in section VII.B.7.c. of the preamble of this proposed 
rule, we are proposing to amend the existing regulations relating to 
the limitation on charges to address beneficiary charges under this new 
LTCH PPS payment rate.
4. Administrative Simplification Compliance Act (ASCA) and Health 
Insurance Portability and Accountability Act (HIPAA) Compliance
    Claims submitted to Medicare must comply with both the 
Administrative Simplification Compliance Act (ASCA) (Pub. L. 107-105), 
and the Health Insurance Portability and Accountability Act of 1996 
(HIPAA) (Pub. L. 104-191). Section 3 of the ASCA requires that the 
Medicare Program deny payment under Part A or Part B for any expenses 
incurred for items or services ``for which a claim is submitted other 
than in an electronic form specified by the Secretary.'' Section 
1862(h) of the Act (as added by section 3(a) of the ASCA) provides that 
the Secretary shall waive such denial in two specific types of cases 
and may also waive such denial ``in such unusual cases as the Secretary 
finds appropriate'' (68 FR 48805). Section 3 of the ASCA operates in 
the context of the HIPAA regulations, which include, among other 
provisions, the transactions and code sets standards requirements 
codified under 45 CFR parts 160 and 162 (generally known as the 
Transactions Rule). The Transactions Rule requires covered entities, 
including covered health care providers, to conduct certain electronic 
health care transactions according to the applicable transactions and 
code sets standards.
    The Department of Health and Human Services (HHS) has a number of 
initiatives designed to encourage and support the adoption of health 
information technology and promote nationwide health information 
exchange to improve health care. The Office of the National Coordinator 
for Health Information Technology (ONC) leads these efforts in 
collaboration with other agencies, including CMS and the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE). Through a 
number of activities, including several open government initiatives, 
HHS is promoting the adoption of electronic health record (EHR) 
technology certified under the ONC Health Information Technology (HIT) 
Certification Program developed to support secure, interoperable, 
health information exchange. The HIT Policy Committee (a Federal 
Advisory Committee) has recommended areas in which HIT certification 
under the ONC HIT Certification Program would help support providers 
that are eligible for the Medicare and Medicaid EHR Incentive Programs, 
such as long-term care and postacute care hospitals and behavioral 
health care providers. We believe that the use of certified EHRs by 
LTCHs (and other types of providers that are ineligible for the 
Medicare and Medicaid EHR Incentive Programs) can effectively and 
efficiently help providers improve internal care delivery practices, 
support the exchange of important information across care partners and 
during transitions of care, and could enable the reporting of 
electronically specified clinical quality measures (eCQMs) (as 
described elsewhere in this proposed rule). More information on the ONC 
HIT Certification Program and efforts to

[[Page 24527]]

develop standards applicable to LTCHs can be found by accessing the 
following Web sites and resources:
     http://www.healthit.gov/sites/default/files/generalcertexchangeguidance_final_9-9-13.pdf;
     http://www.healthit.gov/facas/FACAS/health-it-policy-committee/hitpc-workgroups/certificationadoption;
     http://wiki.siframework.org/LCC+LTPAC+Care+Transition+SWG; 
and
     http://wiki.siframework.org/Longitudinal+Coordination+of+Care.

B. Proposed Application of the Site Neutral Payment Rate (Proposed New 
Sec.  412.522)

1. Overview
    Section 1206 of Public Law 113-67 mandates significant changes to 
the payment system for LTCHs beginning with LTCH discharges occurring 
in cost reporting periods beginning on or after October 1, 2015. Under 
the current LTCH PPS, all discharges are paid under the LTCH PPS 
standard Federal payment rate (that is, payments calculated under the 
existing regulations, including adjustments, in Subpart O of 42 CFR 
part 412). Section 1206 requires the establishment of an alternate 
``site neutral'' payment rate for Medicare inpatient discharges from an 
LTCH that fail to meet certain statutorily defined criteria. Discharges 
that meet the criteria will continue to be paid the LTCH PPS standard 
Federal payment rate. Discharges that do not meet the statutory 
criteria will be paid at a new site neutral payment rate, as described 
below. We note that, for the remainder of this section, the phrase 
``LTCH PPS standard Federal payment rate case'' refers to a LTCH PPS 
case that meets the criteria for exclusion from the site neutral 
payment rate under section 1886(m)(6)(A)(ii) of the Act as discussed in 
section VII.B.3. of the preamble of this proposed rule, and the phrase 
``site neutral payment rate case'' refers to a LTCH PPS case that does 
not meet the statutory patient-level criteria and, therefore, will be 
paid the applicable site neutral payment rate in accordance with 
section 1886(m)(6)(A)(i) of the Act, as discussed in section VII.B.4. 
of the preamble of this proposed rule.
    Under section 1886(m)(6)(A) of the Act as added by section 1206(a) 
of Public Law 113-67, beginning in cost reporting periods starting on 
or after October 1, 2015, all LTCH discharges are paid according to the 
site neutral payment rate unless certain criteria are met. For LTCH 
cases that meet the criteria for exclusion, the site neutral payment 
rate does not apply and payment will be made without regard to the 
provisions of section 1886(m)(6) of the Act. For cases that meet the 
criteria for exclusion from the site neutral payment rate, payment will 
continue to be based on the LTCH PPS standard Federal payment rate as 
determined in Sec.  412.523. As discussed in section VII.B.3. of the 
preamble of this proposed rule, under section 1886(m)(6)(A)(ii) of the 
Act, the criteria for exclusion from the site neutral payment rate are: 
(1) The discharge from the LTCH does not have a principal diagnosis 
relating to a psychiatric diagnosis or to rehabilitation; (2) admission 
to the LTCH was immediately preceded by discharge from a subsection (d) 
hospital; and (3) the immediately preceding stay in a subsection (d) 
hospital included at least 3 days in an intensive care unit (ICU) 
(referred to in this proposed rule as the ICU criterion) or the 
discharge from the LTCH is assigned to a MS-LTC-DRG based on the 
patient's receipt of ventilator services of at least 96 hours (referred 
to in this proposed rule as the ventilator criterion).
    In this section of the proposed rule, we discuss our proposals to 
implement the required changes to the LTCH PPS payment rate, as well as 
other related policy proposals in accordance with section 1206(a) of 
Public Law 113-67 under the broad authority of section 123(a)(1) of the 
BBRA, as amended by section 307(b) of the BIPA.
2. Proposed Application of the Site Neutral Payment Rate Under the LTCH 
PPS
    For FY 2016, we are proposing to add a new section to the 
regulations under 42 CFR part 412 Subpart O (proposed new Sec.  
412.522) to establish the site neutral payment rate required by section 
1886(m)(6) of the Act as added by section 1206(a)(1) of Public Law 113-
67. Specifically, section 1886(m)(6) of the Act requires that, 
beginning in cost reporting periods occurring on or after October 1, 
2015, all LTCH discharges will be paid under the site neutral payment 
rate unless certain criteria are met. All LTCH discharges that meet the 
criteria for exclusion from the site neutral payment rate will continue 
to be paid the LTCH PPS standard Federal payment rate. Accordingly, in 
this proposed rule, under the broad authority of section 123(a)(1) of 
the BBRA, as amended by section 307(b) of the BIPA and in accordance 
with section 1206(a) of Public Law 113-67, we are proposing to 
implement the statutory criteria for excluding cases from the site 
neutral payment rate under proposed new Sec.  412.522(b), as well as 
establish the requirements for determining the site neutral payment 
rate for a given LTCH discharge under proposed new Sec.  412.522(c). In 
addition, we are proposing to make conforming changes to paragraph 
(a)(2) of Sec.  412.521 to include the new site neutral payment rate 
established in accordance with proposed new Sec.  412.522 as a method 
of payment under the LTCH PPS. We also are proposing a technical change 
to the language in Sec.  412.521(a)(2) that currently refers to the 
Federal payment rate by changing the term from ``Federal payment rate'' 
to ``standard Federal payment rate'' in order to provide consistent 
terminology when referring to such a payment.
3. Criteria for Exclusion From the Site Neutral Payment Rate
a. Statutory Provisions
    As stated earlier, section 1206(a) of Public Law 113-67 amended 
section 1886(m) of the Act by adding paragraph (6), which specifies 
that beginning in cost reporting periods starting on or after October 
1, 2015, all LTCH PPS discharges are paid according to the site neutral 
payment rate unless certain criteria are met. In general, under section 
1886(m)(6)(A)(ii) of the Act, the criteria for exclusion from the site 
neutral payment rate are: the discharge from the LTCH does not have a 
principal diagnosis relating to a psychiatric diagnosis or to 
rehabilitation; admission to the LTCH was immediately preceded by 
discharge from a subsection (d) hospital; and the immediately preceding 
stay in a subsection (d) hospital included at least 3 days in an 
intensive care unit (ICU) (referred to in this proposed rule as the ICU 
criterion) or the discharge from the LTCH is assigned to an MS-LTC-DRG 
based on the patient's receipt of ventilator services of at least 96 
hours (referred to in this proposed rule as the ventilator criterion). 
Below we present our proposals to implement the statutory criteria for 
exclusion from the site neutral payment rate under sections 
1886(m)(6)(A)(ii)(I) and (II) of the Act. b. Proposed Implementation of 
the Criterion for a Principal Diagnosis Relating to a Psychiatric 
Diagnosis or to Rehabilitation
    Section 1886(m)(6)(A)(ii)(II) of the Act specifies that in order 
for an LTCH discharge to be excluded from payment under the site 
neutral payment rate, the LTCH discharge cannot have a principal 
diagnosis relating to a psychiatric diagnosis or to rehabilitation. To 
implement this criterion, under the broad authority of section 
123(a)(1) of the BBRA, as amended by section 307(b)

[[Page 24528]]

of the BIPA and in accordance with section 1206(a) of Public Law 113-
67, we are proposing to identify cases with a principal diagnosis 
relating to a psychiatric diagnosis or to rehabilitation using specific 
MS-LTC-DRGs that we believe indicate such principal diagnoses. We are 
inviting public comments on our proposal to identify these cases using 
specific MS-LTC-DRGs that we believe indicate such principal diagnoses, 
including the specific MS-LTC-DRGs presented under this proposed 
approach.
    As discussed in section VII.C.2. of the preamble of this proposed 
rule, the MS-LTC-DRG patient classifications are, by extension, the 
same as the MS-DRG patient classifications used under the IPPS. The 
process of developing the MS-DRGs, and by extension the MS-LTC-DRGs, 
began by dividing all possible principal diagnoses into mutually 
exclusive principal diagnosis areas, referred to as Major Diagnostic 
Categories (MDCs). In general, a case is assigned to an MDC based on 
the patient's principal diagnosis before the case is assigned to an MS-
DRG. Once the MDCs were defined, each MDC was evaluated to identify 
which patient characteristics would be expected to result in similar 
hospital resource consumption. Because the presence of a surgical 
procedure that required the use of the operating room would have a 
significant effect on the type of hospital resources used to treat a 
patient, most MDCs were initially divided into surgical DRGs and 
medical DRGs. Some surgical and medical DRGs were further 
differentiated based on the presence or absence of a complication or 
comorbidity (CC) or a major complication or comorbidity (MCC). (For 
additional information and details on the development of the MS-DRG 
classifications, we refer readers to the FY 2010 IPPS/LTCH PPS final 
rule (74 FR 43764 through 43765).)
    As such, Medicare LTCH discharges are classified into MS-LTC-DRGs 
based primarily on the patient's principal diagnosis, as well as up to 
24 additional diagnoses, and up to 25 procedures performed during the 
LTCH stay. Within a small number of MS-LTC-DRGs, classification is also 
based on the patient's age, sex, and discharge status. The diagnosis 
and procedure information is currently reported by the hospital using 
codes from the ICD-9-CM coding system. For FY 2015, the MS-DRGs Version 
32 are being used under the IPPS and the MS-LTC-DRGs Version 32 are 
being used under the LTCH PPS, which are based on ICD-9-CM codes. 
However, hospitals are required to use the ICD-10-CM/PCS coding system 
beginning October 1, 2015. As discussed in section II.G.1.a. of the 
preamble of this proposed rule, the anticipated transition to ICD-10 
necessitated the development of an ICD-10-CM/PCS version of the MS-
DRGs. To this end, CMS undertook a variety of activities, including a 
project to convert the ICD-9-based MS-DRGs to ICD-10 MS-DRGs using the 
General Equivalence Mappings (GEMs). The GEMs provide a map between 
ICD-9-CM and ICD-10 codes (78 FR 50549). For additional details on the 
various efforts taken by CMS in preparation for the transition from 
ICD-9-CM to ICD-10-CM/PCS, we refer readers to section II.G.1. of the 
preamble of this proposed rule or the CMS Web site at: http://www.cms.gov/Medicare/Coding/ICD10/index.html.
    For FY 2016, we are proposing to use the ICD-10 MS-DRGs Version 33 
under the IPPS and the ICD-10 MS-LTC-DRGs Version 33 under the LTCH 
PPS. Specifically, as discussed in section II.G.1.b. of the preamble of 
this proposed rule, we are proposing the ICD-10 MS-DRGs Version 33 as 
the replacement logic for the ICD-9-based MS-DRGs Version 32 as part of 
the proposed MS-DRG updates (and by extension the MS-LTC-DRG updates, 
as discussed in section VII.C.2. of the preamble of this proposed rule) 
for FY 2016. We are inviting public comments on how well the ICD-10 MS-
DRGs Version 32 (and by extension MS-LTC-DRGs Version 32) replicates 
the logic of the MS-DRGs Version 32 (and by extension MS-LTC-DRGs 
Version 32) based on ICD-9-CM codes. In addition, we are inviting 
public comments on the translations from ICD-9-CM to ICD-10-CM/PCS with 
regard to our proposal to identify LTCH discharges with a principal 
diagnosis relating to a psychiatric diagnosis or to rehabilitation 
using specific ICD-10 MS-LTC-DRGs that we believe indicate such 
principal diagnoses, particularly the validity of the specific MS-LTC-
DRGs listed under this proposed approach discussed below in this 
section. (We note that, for the remainder of the section, when we refer 
to MS-DRGs Version 33 (or by extension MS-LTC-DRGs), we are referring 
to the ICD-10-based MS-DRGs Version 33 (and by extension MS-LTC-DRGs), 
unless otherwise stated. Similarly, when we refer to MS-DRGs Version 32 
(or by extension MS-LTC-DRGs), we are referring to the ICD-9-based MS-
DRGs Version 32 (and by extension MS-LTC-DRGs), unless otherwise 
stated).
    In this proposed rule, we are proposing under proposed new Sec.  
412.522(b)(1)(i) to identify LTCH discharges with principal diagnoses 
relating to a psychiatric diagnosis or to rehabilitation based on the 
MS-LTC-DRG assignment in accordance with Sec.  412.513 of the 
regulations. In developing this proposal, we began by examining which 
ICD-9-CM diagnosis codes appropriately identify a principal diagnosis 
related to a psychiatric diagnosis or to rehabilitation. Next, we 
determined which MS-DRGs (and by extension, MS-LTC-DRGs) those ICD-9-
based diagnosis codes grouped to using Version 32 of the ICD-9-CM MS-
DRG Definitions Manual, which shows the valid principal diagnoses for 
each MDC and the MS-DRG assignment for each of those principal 
diagnoses. We believe that the resulting list of MS-LTC-DRGs Version 32 
are indicative of an LTCH discharge with a principal diagnosis relating 
to a psychiatric diagnosis or to rehabilitation because the 
classification of a Medicare discharge into a MS-LTC-DRG is 
predominantly based on the patient's principal diagnosis.
    As stated above and as discussed in greater detail in section 
II.G.1. of the preamble of this proposed rule, in preparation for the 
implementation of ICD-10, we have developed ICD-10-based MS-LTC-DRGs. 
Under the ICD-10 MS-DRGs Version 32 (and by extension the ICD-10 MS-
LTC-DRGs Version 32), the same list of ICD-10 MS-LTC-DRGs are 
indicative of an LTCH discharge with a principal diagnosis relating to 
a psychiatric diagnosis or to rehabilitation. As stated earlier in this 
section, for FY 2016, we are proposing to use the ICD-10 MS DRGs 
Version 33 under the IPPS and the ICD-10 MS-LTC-DRGs Version 33 under 
the LTCH PPS. Therefore, for FY 2016, we are proposing that an LTCH 
discharge assigned to one of the following proposed ICD-10 MS-LTC-DRGs 
Version 33 would identify a case with a principal diagnosis relating to 
a psychiatric diagnosis:
     MS-LTC-DRG 876 (O.R. Procedure with Principal Diagnosis of 
Mental Illness);
     MS-LTC-DRG 880 (Acute Adjustment Reaction & Psychosocial 
Dysfunction);
     MS-LTC-DRG 881 (Depressive Neuroses);
     MS-LTC-DRG 882 (Neuroses except Depressive);
     MS-LTC-DRG 883 (Disorders of Personality & Impulse 
Control);
     MS-LTC-DRG 884 (Organic Disturbances & Mental 
Retardation);
     MS-LTC-DRG 885 (Psychoses);
     MS-LTC-DRG 886 (Behavioral & Developmental Disorders);
     MS-LTC-DRG 887 (Other Mental Disorder Diagnoses);

[[Page 24529]]

     MS-LTC-DRG 894 (Alcohol/Drug Abuse or Dependence, Left 
Ama);
     MS-LTC-DRG 895 (Alcohol/Drug Abuse or Dependence, with 
Rehabilitation Therapy);
     MS-LTC-DRG 896 (Alcohol/Drug Abuse or Dependence, without 
Rehabilitation Therapy with MCC); and
     MS-LTC-DRG 897 (Alcohol/Drug Abuse or Dependence, without 
Rehabilitation Therapy without MCC).
    We also are proposing that, for FY 2016, an LTCH discharge assigned 
to one of the following proposed ICD-10 MS-LTC-DRGs Version 33 would 
identify an LTCH discharge with a principal diagnosis relating to 
rehabilitation:
     MS-LTC-DRG 945 (Rehabilitation with CC/MCC); and
     MS-LTC-DRG 946 (Rehabilitation without CC/MCC).
    Under these proposals, for FY 2016, an LTCH discharge grouped to 
any of the proposed MS-LTC-DRGs listed above would not meet the 
criteria under proposed new Sec.  412.522(b)(1)(i) to be excluded from 
the site neutral payment rate.
c. Proposed Addition of Definition of a ``Subsection (d) Hospital'' to 
LTCH Regulations
    The site neutral payment rate established in section 1206(a) of 
Public Law 113-67 includes several references to ``subsection (d) 
hospitals.'' The term ``subsection (d) hospital'' is defined in section 
1886(d)(1)(B) of the Act and generally means a hospital located in 1 of 
the 50 States or the District of Columbia other than a psychiatric 
hospital, a rehabilitation hospital, a children's hospital, an LTCH, or 
a cancer hospital. Section 1886(m)(6)(D) of the Act, as added by 
section 1206(a)(1) of Public Law 113-67, also specifies that any 
reference in that paragraph to a ``subsection (d) hospital'' is deemed 
to include a ``subsection (d) Puerto Rico hospital.'' Section 
1886(d)(9)(A) of the Act states that, as used in that section, the term 
``subsection (d) Puerto Rico hospital'' means a hospital that is 
located in Puerto Rico and that would be considered a subsection (d) 
hospital (as defined in paragraph (d)(1)(B)) if it were located in 1 of 
the 50 States.
    As part of our proposed implementation of section 1206(a) of Public 
Law 113-67, and under the broad authority under section 123(a)(1) of 
the BBRA, as amended by section 307(b) of the BIPA, we are proposing to 
add a definition of the term ``subsection (d) hospital'' under Sec.  
412.503 that would be applicable to the LTCH regulations under proposed 
new Sec.  412.522. Specifically, we are proposing to define a 
``subsection (d) hospital'' under Sec.  412.503, for purposes of 
proposed new Sec.  412.522, as a hospital defined in section 
1886(d)(1)(B) of the Act, and includes any hospital that is located in 
Puerto Rico that would be defined as a subsection (d) hospital as 
defined in section 1886(d)(1)(B) of the Act if it were located in 1 of 
the 50 States. We believe that this proposed definition is consistent 
with definitions used in the statute, and would provide additional 
clarity in the proposed regulations presented in this proposed rule to 
implement the site neutral payment rate policies required by section 
1206(a) of Public Law 113-67.
d. Proposed Interpretation of ``Immediately Preceded'' by a Subsection 
(d) Hospital Discharge
    Section 1886(m)(6)(A)(ii)(II) of the Act specifies that, in order 
to be excluded from payment under the site neutral payment rate, the 
LTCH discharge must meet the ICU criterion at section 
1866(m)(6)(A)(iii) of the Act or the ventilator criterion at section 
1866(m)(6)(A)(iv) of the Act, which are discussed in greater detail 
below. Both the ICU criterion and the ventilator criterion require that 
the LTCH admission be immediately preceded by a discharge from a 
subsection (d) hospital.
    For purposes of the ICU criterion and the ventilator criterion at 
sections 1866(m)(6)(A)(iii) and (iv) of the Act, under the broad 
authority under section 123(a)(1) of the BBRA, as amended by section 
307(b) of the BIPA, we are proposing that the phrase ``immediately 
preceded'' by a discharge from a subsection (d) hospital means a 
Medicare patient is discharge from the subsection (d) hospital 
immediately prior to the patient's admission to an LTCH. A Medicare 
patient discharge from the subsection (d) hospital to any other 
setting, including home, an IRF, an IPF, or a SNF would not be 
considered to be ``immediately preceded'' by a discharge from a 
subsection (d) hospital, nor fulfill the ICU criterion or the 
ventilator criterion in order to qualify for exclusion from the site 
neutral payment rate. We believe that this proposed policy, which would 
be codified at new proposed Sec.  412.522(b)(1)(ii), would 
appropriately identify an LTCH admission that was immediately preceded 
by a discharge from a subsection (d) hospital. Under this proposal, we 
are proposing to determine an applicable Medicare patient discharge 
from a subsection (d) hospital (as defined at proposed Sec.  412.503) 
by using the subsection (d) hospital's discharge date on the Medicare 
claim and the LTCH admission date on the Medicare claim for the LTCH's 
discharge. We also are proposing, for purposes of evaluation of the 
exclusion from the site neutral payment rate, that the discharge from a 
subsection (d) hospital must use Patient Discharge Status Code 63, 
which signifies a patient was discharged or transferred to an LTCH, or 
Patient Discharge Status Code 91, which signifies a patient was 
discharged/transferred to a Medicare-certified LTCH with a planned 
acute care hospital inpatient readmission on hospital claims submitted 
for the LTCH's discharge to be eligible for exclusion from the site 
neutral payment rate. We are proposing that a Medicare patient 
discharge that occurred on the same date as the LTCH admission (or, in 
certain rare circumstances, that occurred the date before the date of 
the LTCH admission) that has a patient discharge status code on the 
subsection (d) hospital claim that indicates discharge or transfer to 
an LTCH would fulfill the immediately preceded portion of the 
requirements to be excluded from the site neutral payment rate. Under 
this proposal, discharges from subsection (d) hospitals reporting a 
patient discharge status code other than 63 or 91 on the hospital's 
claim could not serve as a basis for a discharge meeting the 
immediately preceded by a subsection (d) hospital discharge requirement 
for exclusion from the site neutral payment rate. We believe that it is 
appropriate to include discharges from a subsection (d) hospital that 
occur on the date before the date of the LTCH admission (that is, 
essentially within 1 calendar day of the LTCH admission) under our 
proposed interpretation of the term ``immediately preceded'' in order 
to account for those rare circumstances where a patient is discharged 
from a subsection (d) hospital before the midnight census, but was not 
admitted to the LTCH until after the midnight census of that date of 
discharge. As we expect that the vast majority of LTCH admissions would 
occur on the same date as the discharge from the subsection (d) 
hospital, and only in rare instances would the LTCH admission occur on 
the date after the discharge date from the subsection (d) hospital, 
increased frequency in LTCH admissions on the date after the IPPS 
discharge date would raise concerns that could merit further scrutiny.
    We note that this proposed interpretation of ``immediately 
preceded'' by a subsection (d) hospital would work in tandem with our 
existing interrupted stay policy at Sec.  412.531.

[[Page 24530]]

Although we are not proposing to make any changes to our existing 
interrupted stay policy, we are making reference to it only to 
illustrate the consistency between our proposed policy and our existing 
program policies. The interrupted stay policy is a payment adjustment 
that was included under the LTCH PPS from the inception. In this 
discussion, we use the terms ``interrupted stay'' and ``interruption of 
stay'' interchangeably. An interruption of stay occurs when, during the 
course of an LTCH hospitalization, the patient is discharged to an 
inpatient acute care hospital, an IRF, or a SNF for treatment or 
service that is not available at the LTCH for a specified period 
followed by readmittance to the same LTCH. As we stated when we 
established the interrupted stay policy (67 FR 50187), we believe that 
the readmission to the LTCH represents a continuation of the initial 
interrupted treatment, rather than a new admission. If an interruption 
of stay occurred, payment for both ``halves'' of the LTCH discharge 
would be bundled, and Medicare would make a single payment based on the 
second date of discharge. The interruption of stay policy treats the 
second part of an interrupted stay as a ``continuation'' of the initial 
stay, not a separate LTCH admission. Based on this policy and the 
requirements of section 1206(a) of Public Law 113-67, in order for an 
LTCH discharge to be excluded from the site neutral payment rate and, 
therefore, receive payment based on the LTCH PPS standard Federal 
payment rate, the initial LTCH admission must be immediately preceded 
by a subsection (d) hospital discharge. Any interruption of stay 
defined under Sec.  412.531 would not invalidate the immediately 
preceded status for the LTCH admission because we historically have 
treated interrupted stays as one stay. We believe that this 
interpretation of ``immediately preceded'' in the context of the 
existing interrupted stay policy is consistent with our historical 
treatment of LTCH cases involving interrupted stays.
e. Proposed Implementation of the Intensive Care Unit (ICU) Criterion
    Section 1886(m)(6)(A)(iii)(I) of the Act specifies that in order to 
be excluded from payment under the site neutral payment rate under the 
ICU criterion, the LTCH admission must be immediately preceded by a 
discharge from a subsection (d) hospital that included at least 3 days 
in an intensive care unit (ICU), as determined by the Secretary. 
Furthermore, section 1886(m)(6)(A)(iii)(II) of the Act states that, in 
determining ICU days, the Secretary shall use data from revenue center 
codes 020X or 021X (or such successor codes as the Secretary may 
establish). Revenue center codes are reported on the hospital claim 
(Form CMS-1450 that is also known as the UB-04), which is a uniform 
institutional provider bill suitable for use in billing multiple third 
party payers, that is developed and maintained by the National Uniform 
Billing Committee (NUBC). (We refer readers to Chapter 25, subsection 
70.1 of the Medicare Claims Processing Manual (Pub. 100-4).) The 
revenue code description for revenue center code 020X is for intensive 
care, and the revenue code description for revenue center code 021X is 
for coronary care. Both revenue center codes are used to bill Medicare 
for services provided by ``intensive care units (ICUs)'' as defined 
under our existing definition at Sec.  413.53(d) of the regulations. 
Both of these revenue code descriptions are further divided into 
subcategories that form a revenue center code series. For billing 
purposes, the ``X'' in the revenue code descriptions for revenue center 
codes 020X and 021X refers to one of the subcategories available for 
that revenue center code series. (For additional information on the use 
of revenue center codes 020X and 021X, we refer readers to Chapter 25, 
subsection 75.4 of the Medicare Claims Processing Manual (Pub. 100-4) 
and the NUBC's Web site at: http://www.nubc.org.)
    To implement the ICU criterion specified at section 
1886(m)(6)(A)(iii) of the Act, we are proposing under proposed new 
Sec.  412.522(b)(2) that the discharge from the subsection (d) hospital 
that immediately preceded (as previously discussed in section 
VII.B.3.d. of the preamble of this proposed rule) the admission to the 
LTCH includes at least 3 days in an ICU (as defined in Sec.  413.53(d) 
of the regulations). Consistent with the broad authority under section 
123(a)(1) of the BBRA, as amended by section 307(b) of the BIPA, we are 
proposing that at least 3 days must be reported on the hospital claim 
submitted by the subsection (d) hospital using revenue center codes 
020X or 021X, the use of which must be consistent with our definition 
of an ICU under Sec.  413.53(d) in order to fulfill the ICU criterion 
to be excluded from the site neutral payment rate. We believe that this 
proposal is consistent with the statute and appropriate because it 
would ensure that payment for discharges made under the LTCH PPS 
standard Federal payment rate are for services provided to critically 
ill beneficiaries who require long-term acute hospitalization.
    In developing our proposal for the implementation of the ICU 
criterion at section 1886(m)(6)(A)(iii) of the Act, we examined current 
hospital coding practices and the use of revenue center codes 020X and 
021X, including the subcategory codes, as reported on the Medicare 
claims for IPPS hospitals. We do not expect a change in general 
hospital coding practices regarding revenue center code categories 020X 
and 021X as a result of this proposal. However, we will continue to 
monitor such coding practices and may propose to revise the ICU 
criterion regulations in the future if data from revenue center code 
series for revenue center codes 020X and 021X indicate that any of the 
subcategories are not consistent with services provided by ICUs as 
defined under Sec.  413.53(d).
    As previously noted with regard to our proposed implementation of 
the ``immediately preceded'' requirement, our proposed implementation 
of the ICU criterion would also work in tandem with our existing 
interruption of stay policy. Again, we note that we are not proposing 
to make any changes to the existing interrupted stay policy, and we are 
referencing it only to illustrate the consistency between our proposed 
policy and our existing program policies. (For a description of our 
existing interrupted stay policy, we refer readers to the discussion in 
section VII.B.3.d. of the preamble of this proposed rule.) As 
previously noted, LTCH cases involving interrupted stays are treated as 
a single continuous LTCH stay. As such, under our proposal, the 
discharge from a subsection (d) hospital that immediately precedes the 
initial LTCH admission would determine whether the ICU criterion is 
met. Under our proposal, compliance with the ICU criterion would be 
based exclusively on the number of days the beneficiary spent in the 
immediately preceding subsection (d) hospital's ICU prior to being 
initially admitted to the LTCH. If, during the intervening period of an 
interrupted LTCH stay, a beneficiary spends any number of days in the 
ICU of a subsection (d) hospital, those days would not be considered in 
the evaluation of the LTCH discharge for purposes of meeting the ICU 
criterion because such care would not have immediately preceded the 
initial admission to the LTCH. Conversely, if the subsection (d) 
hospital discharge that immediately preceded the initial LTCH admission 
meets the ICU criterion (that is, includes at least 3 ICU days), and 
the period of time relating to an intervening interrupted stay does not 
include any days in a subsection (d)

[[Page 24531]]

hospital's ICU, the ICU criterion would still be met because the 
initial portion of the LTCH admission fulfilled the ICU criterion for 
exclusion from the site neutral payment rate. We believe that this 
proposed interpretation of the ICU criterion in the context of the 
existing interrupted stay policy is consistent with our historical 
treatment of LTCH cases involving interrupted stays.
f. Proposed Implementation of the Ventilator Criterion
    Section 1886(m)(6)(A)(vi) of the Act specifies that in order to be 
excluded from payment under the site neutral payment rate under the 
ventilator criterion, the LTCH admission must be immediately preceded 
by a discharge from a subsection (d) hospital (as discussed in section 
VII.B.3.d. of the preamble of this proposed rule), and the LTCH 
discharge must be assigned to an MS-LTC-DRG based on the beneficiary's 
receipt of at least 96 hours of ventilator services in the LTCH. As we 
discussed in section VII.B.3.b. of the preamble of this proposed rule, 
cases are assigned to MS-LTC-DRGs based, in part, on procedures 
performed during the beneficiary's LTCH stay, which are reported on a 
Medicare claim using procedure codes. We are proposing that, for the 
purposes of a discharge being excluded from the site neutral payment 
rate, the discharge must use the applicable procedure code to indicate 
that at least 96 hours of ventilator services were received during the 
LTCH stay. Currently, under the ICD-9-CM coding system, procedure code 
9672 (Continuous invasive mechanical ventilation for 96 consecutive 
hours or more) is used to describe such long-term mechanical ventilator 
services provided during a hospital stay, including an LTCH stay. As 
discussed in sections II.G.1.a. and VII.C. of the preamble of this 
proposed rule, the use of the ICD-10-CM/PCS coding system will be 
required beginning October 1, 2015. Under the ICD-10-PCS coding system, 
procedure code 5A1955Z (Respiratory ventilation, greater than 96 
consecutive hours) describes such long-term mechanical ventilator 
services provided during a hospital stay, including an LTCH stay. 
Therefore, we believe that it would be appropriate and consistent with 
the requirements at section 1886(m)(6)(A)(vi)(II) of the Act to require 
LTCHs, effective with discharges in cost reporting periods beginning on 
or after October 1, 2015, to report procedure code 5A1955Z on hospital 
claims to indicate that the beneficiary received at least 96 hours of 
ventilator services during the LTCH stay as a condition of the LTCH 
discharge being eligible for exclusion from the site neutral payment 
rate based on the ventilator criterion. Under the broad authority under 
section 123(a)(1) of the BBRA, as amended by section 307(b) of the BIPA 
and in accordance with section 1206(a) of Public Law 111-67, under 
proposed new Sec.  412.522(b)(3), we are proposing to require LTCHs to 
report ICD-10-PCS procedure code 5A1955Z on their claims to indicate 
that the beneficiary received at least 96 hours of ventilator services 
during the LTCH stay as a condition of that discharge being eligible 
for exclusion from the site neutral payment rate based on the 
ventilator criterion.
    Under this proposal, any LTCH discharges that do not report this 
procedure code on the claim submitted for payment would not meet the 
ventilator criterion. In developing this proposal, we recognized that 
many of the discharges reporting procedure code 5A1955Z (that is, those 
cases involving at least 96 hours of mechanical ventilation services) 
are grouped into one of six MS-LTC-DRGs. However, discharges grouped 
into these six MS-LTC-DRGs are not necessarily limited to cases 
involving beneficiaries who have received at least 96 hours of 
mechanical ventilation services. In addition, there are some cases that 
do involve at least 96 hours of mechanical ventilation that are 
correctly assigned to MS-LTC-DRGs other than the six MS-LTC-DRGs 
mentioned; for example, those cases grouped based on surgical 
hierarchy. Given the variance of possible MS-LTC-DRG assignments based 
on the procedure code indicating the receipt of at least 96 hours of 
mechanical ventilator services and the MS-LTC-DRG groupings, we believe 
that our proposal to determine eligibility for meeting the ventilator 
criterion under section 1886(m)(6)(A)(vi)(II) of the Act based on the 
procedure code used is more consistent with the language of the Act as 
added by Public Law 113-67.
4. Proposed Determination of the Site Neutral Payment Rate (Proposed 
New Sec.  412.522(c))
a. General
    Section 1206(a) of Public Law 113-67 amended section 1886(m) of the 
Act by adding paragraph (6), which specifies that beginning with cost 
reporting periods starting on or after October 1, 2015, all LTCH PPS 
discharges are paid according to the site neutral payment rate unless 
certain criteria are met. In general, section 1886(m)(6)(B)(ii) of the 
Act specifies that the site neutral payment rate is the lower of the 
IPPS comparable per diem amount under Sec.  412.529(d)(4), including 
any applicable outlier payments under Sec.  412.525(a), or 100 percent 
of the estimated cost of the case. Consistent with the requirements of 
section 1886(m)(6)(B)(ii) of the Act, we are proposing under proposed 
new Sec.  412.522(c)(1) that the site neutral payment rate is the lower 
of the IPPS comparable per diem amount determined under Sec.  
412.529(d)(4), including any applicable outlier payments under Sec.  
412.525(a), or 100 percent of the estimated cost of the case determined 
under Sec.  412.529(d)(2).
    Under our proposed calculation of the site neutral payment rate, 
proposed new Sec.  412.522(c)(1)(i) would provide that the IPPS 
comparable per diem amount would be calculated using the same method 
used to determine an amount comparable to the hospital IPPS per diem 
amount as set forth in the existing regulations atSec.  412.529(d)(4), 
consistent with section 1886(m)(6)(B)(ii)(I) of the Act. Specifically, 
in the RY 2007 LTCH PPS final rule (71 FR 27852 through 27853), we 
established a method to determine an amount payable under 42 CFR part 
412, subpart O, that is comparable to what would otherwise be paid 
under the IPPS for the costs of inpatient operating services, which is 
commonly referred to as the ``the IPPS comparable per diem amount.'' 
Accordingly, consistent with Sec.  412.529(d)(4), we are proposing to 
determine the IPPS comparable per diem amount based on the standardized 
amount determined under Sec.  412.64(c), adjusted by the applicable DRG 
weighting factors determined under Sec.  412.60 as specified at Sec.  
412.64(g). We are proposing to further adjust this amount to account 
for differences in area wage levels based on geographic location using 
the applicable IPPS labor-related share and the IPPS wage index for 
nonreclassified hospitals published in the annual IPPS final rule in 
accordance with Sec.  412.525(c). For LTCHs located in Alaska and 
Hawaii, we are proposing that this amount would be further adjusted by 
the applicable COLA factors established annually during the rulemaking 
cycle. We also are proposing that the IPPS comparable per diem amount 
include an adjustment for treating a disproportionate share of low-
income patients, consistent with the DSH payment adjustment under Sec.  
412.106, as applicable, which would include a proxy adjustment for the 
uncompensated care payment (78 FR 50765 through 50767). In the case of 
an LTCH that is a teaching hospital, we are proposing that the IPPS 
comparable per

[[Page 24532]]

diem amount include an IME payment adjustment, consistent with the 
formula set forth under Sec.  412.105, where the LTCH's IME cap (that 
is, the limit on the number of full-time equivalent (FTE) residents 
that may be counted for IME) would be imputed from the LTCH's direct 
GME cap as set forth at Sec.  413.79(c)(2). In addition, we are 
proposing that the IPPS comparable per diem amount also include payment 
for inpatient capital-related costs, based on the capital IPPS Federal 
rate determined in accordance with Sec.  412.308(c), adjusted by the 
applicable IPPS DRG weighting factors. We are proposing to further 
adjust the capital IPPS Federal rate by the applicable geographic 
adjustment factors based on the geographic location of the LTCH and the 
COLA factors for LTCHs located Alaska and Hawaii, consistent with Sec.  
412.316. In addition, we are proposing to include in this amount the 
adjustments to the capital IPPS Federal rate for DSH payments in 
accordance with Sec.  412.320 and IME payments in accordance with Sec.  
412.322. Consistent with Sec.  412.529(d)(4)(i)(B) and (C), we are 
proposing to determine the IPPS comparable per diem amount by dividing 
the IPPS comparable payment amount described above by the geometric 
average length of stay of the specific MS-DRG under the IPPS and 
multiplying that amount by the covered days of the LTCH stay. We are 
proposing that the IPPS comparable per diem amount be limited to the 
full comparable amount to what would otherwise be paid under the IPPS.
    The IPPS comparable per diem amount described under Sec.  
412.529(d)(4) does not include additional payments for extraordinarily 
high-cost cases under the IPPS outlier policy. Therefore, consistent 
with the requirements of section 1886(m)(6)(B)(ii)(I) of the Act, under 
our proposed calculation of the site neutral payment rate under 
proposed new Sec.  412.522(c)(1), we are proposing to add any high-cost 
outlier (HCO) payment that may be payable under Sec.  412.525(a) to the 
IPPS comparable per diem amount. To do so, as discussed in greater 
detail in section VII.B.7.b. of the preamble of this proposed rule, we 
also are proposing to revise the HCO policy under existing Sec.  
412.525(a) to provide for high-cost outlier payments under the site 
neutral payment rate calculated under proposed new Sec.  412.522(c). We 
are proposing that site neutral payment rate cases receive an 
additional payment for HCOs that would be equal to 80 percent of the 
difference between the estimated cost of the case and the HCO 
threshold, which we are proposing would be the sum of site neutral 
payment rate for the case and the IPPS fixed-loss amount. We also are 
proposing that HCO payments for site neutral payment rate cases would 
be budget neutral and are proposing to apply a budget neutrality factor 
to the LTCH PPS payments for those cases to maintain budget neutrality. 
(For additional information on our proposed revised HCO policy in 
regard to site neutral payment rate cases under Sec.  412.525(a), we 
refer readers to section VII.B.7.b. of the preamble of this proposed 
rule.)
    Furthermore, under our proposed calculation of the site neutral 
payment rate, under proposed new Sec.  412.522(c)(1)(ii), we are 
proposing to calculate 100 percent of the estimated cost of a case by 
multiplying the LTCH's hospital-specific cost-to-charge ratio (CCR) by 
the Medicare allowable charges for the LTCH case, which is the same 
method we use to determine SSO payments under Sec.  412.529(d)(2), as 
well as HCO payments under the HCO policy under Sec.  412.525(a). 
Consistent with our existing policies for computing CCRs under the LTCH 
PPS, we also are proposing to apply the payment policies described 
under Sec.  412.529(f)(4)(i) through (f)(4)(iii) to the calculation of 
the estimated cost of the case for site neutral payment rate cases 
under proposed new Sec.  412.522(c)(1)(ii). Under this proposal, the 
CCR applied at the time a claim is processed would generally be based 
on either the most recent settled cost report or the most recent 
tentatively settled cost report, whichever is from the latest cost 
reporting period. CMS may specify an alternative to the CCR otherwise 
applicable if we believe that the CCR being applied is inaccurate, in 
accordance with section 150.24 of Chapter 3 of the Medicare Claims 
Processing Manual (Pub. 100-4), or an LTCH may request an alternate 
(higher or lower) CCR based on its presentation of substantial evidence 
in support of that alternate. The CMS Regional Office must approve the 
request, and the MAC notifies the LTCH whenever a change is made to its 
CCR. The applicable MAC may also use the statewide average CCR that is 
established annually by CMS if it is unable to determine an accurate 
CCR for an LTCH under one of the circumstances specified at existing 
Sec.  412.529(f)(4)(iii) (that is, in general, for a new LTCH, when the 
LTCH's CCR exceeds 3 standard deviations from the corresponding 
national geometric mean CCR, and for a LTCH for which data to calculate 
a CCR are otherwise not available). These same CCR policies also are 
applicable under the LTCH PPS HCO policy (Sec.  412.525(a)(4)(iv)(B) 
and (a)(4)(iv)(C)).
    Currently, under the LTCH PPS, payments for HCO and SSO cases may 
be subject to reconciliation at cost report settlement under Sec.  
412.525(a)(4)(iv)(D) and Sec.  412.529(f)(4)(iv), respectively. Under 
these policies, reconciliation is based on the CCR calculated using the 
CCR computed from the settled cost report that coincides with the 
discharge. Under our existing criteria, reconciliation occurs in 
instances where a LTCH's actual CCR for the cost reporting period 
fluctuates plus or minus 10 percentage points compared to the interim 
CCR used to calculate payments when a claim is processed. We adopted 
this reconciliation policy for the LTCH PPS HCO and SSO cases because 
CCRs based on settled cost reports are not available when claims are 
processed unless significant delays are imposed on the payment of 
claims. (For additional information, we refer readers to the June 9, 
2003 IPPS/LTCH PPS high-cost outlier final rule (68 FR 34507) and 
sections 150.26 through 150.28 of the Medicare Claims Processing Manual 
(Pub. 100-4).) Given the use of LTCH CCRs to calculate the estimated 
cost of cases under the proposed site neutral payment rate, we believe 
that it would be equally appropriate to apply the current CCR 
reconciliation policy principles to site neutral payment rate payments. 
Therefore, we are proposing under proposed new Sec.  412.522(c)(4) to 
reconcile site neutral payment rate payments based on the CCR 
calculated using the settled cost report that coincides with the 
discharge. We also are proposing that, at the time of any such 
reconciliation of site neutral payment rate payments, such payments be 
adjusted to account for the time value of any underpayments or 
overpayments. Any adjustment would be based upon a widely available 
index to be established in advance by the Secretary and would be 
applied from the midpoint of the cost reporting period to the date of 
reconciliation. The index that would be used to calculate the time 
value of money is the monthly rate of return that the Medicare Trust 
Fund earns, which can be found at: http://www.ssa.gov/OACT/ProgData/newIssueRates.html, consistent with our current reconciliation policy 
described in section 150.27 of Chapter 3 of the Medicare Claims 
Processing Manual (Pub. 100-4). Furthermore, we are proposing that our 
existing policies governing CCRs for both HCO (under Sec.  
412.525(a)(4)(iv)(A) through (C)) and

[[Page 24533]]

SSO payments (under Sec.  412.529(f)(4)(i) through (iii)) would apply 
to the CCRs used to determine the estimated cost of a case under 
proposed new Sec.  412.522(c)(4).
b. Proposed Blended Payment Rate for FY 2016 and FY 2017
    Section 1886(m)(6)(B) of the Act establishes a transitional payment 
method for cases that will be paid the site neutral payment rate for 
LTCH discharges occurring in cost reporting periods beginning during FY 
2016 or FY 2017. For those discharges, the applicable site neutral 
payment rate is to be the blended payment rate specified in section 
1886(m)(6)(B)(iii) of the Act. For LTCH discharges occurring in cost 
reporting periods beginning during FY 2018 or later, the applicable 
site neutral payment rate will be the site neutral payment rate as 
defined in section 1886(m)(6)(B)(ii) of the Act.
    Section 1886(m)(6)(B)(iii) of the Act specifies that the blended 
payment rate is comprised of 50 percent of the site neutral payment 
rate for the discharge under section 1886(m)(6)(B)(ii) of the Act and 
50 percent of the LTCH PPS standard Federal payment rate that would 
have applied to the discharge if paragraph (6) of section 1886(m) of 
the Act had not been enacted. As previously discussed, we are proposing 
to codify the site neutral payment rate specified under section 
1886(m)(6)(B)(ii) of the Act under proposed new Sec.  412.522(c)(1), as 
adjusted under proposed new Sec.  412.522(c)(2). Under proposed new 
Sec.  412.522(c)(1), the site neutral payment rate is the lower of the 
IPPS comparable per diem amount determined under Sec.  412.529(d)(4), 
including any applicable outlier payments under Sec.  412.525(a), or 
100 percent of the estimated cost of the case determined under Sec.  
412.529(d)(2). For purposes of the blended payment rate, we are 
proposing that the payment rate that would otherwise be applicable if 
section 1886(m)(6) of the Act had not been enacted would be the LTCH 
PPS standard Federal payment; which, in light of other proposals 
presented in this proposed rule, would be the LTCH PPS Federal standard 
payment rate that is applicable to discharges that meet the criteria 
for exclusion from the site neutral payment rate under proposed new 
Sec.  412.522(a)(2). That rate is the LTCH PPS standard Federal payment 
rate determined under Sec.  412.523. Therefore, consistent with the 
requirements of section 1886(m)(6)(B)(ii) of the Act, we are proposing 
under proposed new Sec.  412.522(c)(3), for LTCH discharges occurring 
in cost reporting periods beginning on or after October 1, 2015, and on 
or before September 30, 2017 (that is, discharges occurring in cost 
reporting periods beginning during FYs 2016 and 2017), the payment 
amount for site neutral payment rate cases would be a blended payment 
rate, which would be calculated as 50 percent of the applicable site 
neutral payment rate amount for the discharge as determined under 
proposed new Sec.  412.522(c)(1) and 50 percent of the applicable LTCH 
PPS standard Federal payment rate determined under Sec.  412.523. Under 
this proposal, the payment amounts determined under proposed new Sec.  
412.522(c)(1) (the site neutral payment rate) and under Sec.  412.523 
(the LTCH PPS standard Federal rate) would include any applicable 
adjustments, such as HCO payments, as applicable, consistent with the 
requirements under Sec.  412.523(d). For example, the portion of the 
blended payment for the discharge that is based on proposed new Sec.  
412.522(c)(3) would include 50 percent of any applicable site neutral 
HCO payment under our proposed revised HCO payment policy (discussed in 
detail in section VII.B.7.b. of the preamble of this proposed rule), 
consistent with proposed new Sec.  412.522(c)(1)(i), which provides for 
HCO payments under Sec.  412.525(a). Similarly, the portion of the 
blended payment for the discharge that is based on the LTCH PPS 
standard Federal payment rate would include any applicable HCO payment 
under existing Sec.  412.525(a).
c. Proposed LTCH PPS Standard Federal Payment Rate
    Section 1206(a) of Public Law 113-67 amended section 1886(m) of the 
Act by adding paragraph (6), which specifies that beginning with cost 
reporting periods starting on or after October 1, 2015, all LTCH PPS 
discharges are paid according to the site neutral payment rate, unless 
certain criteria are met. For detailed discussion of our proposals 
regarding the criteria for exclusion from the site neutral payment 
rate, we refer readers to section VII.B.3. of the preamble of this 
proposed rule. For LTCH cases that meet the criteria for exclusion from 
the site neutral payment rate, section 1886(m)(6)(A)(ii) of the Act 
specifies that the site neutral payment rate will not apply and payment 
will be made without regard to requirements of section 
1886(m)(6)(A)(ii) of the Act. Consistent with these statutory 
requirements, we are proposing under proposed new Sec.  412.522(a)(2) 
that for LTCH discharges that meet the criteria for exclusion from site 
neutral payment rate under proposed new Sec.  412.522(b), payment will 
be based on the LTCH PPS standard Federal payment rate as determined in 
Sec.  412.523. That is, under proposed new Sec.  412.522(a)(2), LTCH 
PPS standard Federal payment rate cases would continue to be paid based 
on the LTCH PPS standard Federal payment rate. Under this proposal, all 
of the existing payment adjustments under Sec.  412.525(d), that is, 
the adjustments for SSO cases under Sec.  412.529, the adjustments for 
interrupted stays under Sec.  412.531, and the 25-percent threshold 
policy under Sec.  412.534 and Sec.  412.536, would still apply if 
appropriate. In addition, as discussed in greater detail in section 
VII.B.7.b. of the preamble of this proposed rule, we are proposing that 
our existing HCO policy would apply to LTCH PPS standard Federal 
payment rate cases, except that the 8 percent HCO target would be 
established using only data from LTCH PPS standard Federal payment rate 
cases.
5. Proposed Application of Certain Existing LTCH PPS Payment 
Adjustments to Payments Made Under the Site Neutral Payment Rate
    Consistent with current LTCH PPS payment policies for adjusting 
Federal prospective payments, under the broad authority under section 
123(a)(1) of the BBRA, as amended by section 307(b) of the BIPA, we are 
proposing that certain existing payment adjustments under the special 
payment provisions set forth at existing Sec.  412.525(d), with the 
exception of the SSO adjustment described under Sec.  412.525(d)(1). 
These adjustments include the interrupted stay policy and 25-percent 
threshold policy. The current payment adjustment under the interrupted 
stay policy at Sec.  412.531 was developed and implemented prior to the 
statutory LTCH PPS dual-rate payment structure and contains terms 
specific to payment based on the LTCH PPS standard Federal payment rate 
(such as LTC-DRG payment and Federal LTC-DRG prospective payment). 
Under our proposal, the site neutral payment rate would not be 
calculated based on the LTCH PPS standard Federal payment rate because 
the payment would generally be the lower of the IPPS comparable per 
diem amount (including any applicable outlier payments), or 100 percent 
of the estimated cost of the case. Consequently, in order to apply the 
provisions of the existing interrupted stay policy at Sec.  412.531 to 
site neutral payment rate cases, under proposed new Sec.  
412.522(c)(2)(ii), we are proposing to specify that, for purposes of 
the application of the provisions of 412.531 to LTCH discharges 
described under Sec.  412.522(a)(1), the LTCH PPS

[[Page 24534]]

standard payment-related terms, such as ``LTC-DRG payment'', ``full 
Federal LTC-DRG prospective payment'', and ``Federal prospective 
payment,'' mean the site neutral payment rate calculated under proposed 
new Sec.  412.522(c).
    We believe that it is appropriate to apply these adjustments to the 
site neutral payment rate cases because the site neutral payment rate 
merely establishes an alternate payment amount under the LTCH PPS, as 
opposed to creating an exception from the LTCH PPS. Additionally, we 
believe that the policy concerns upon which these policies were based 
apply equally to payments made under the LTCH PPS site neutral payment 
rates and the standard Federal payment rates.
    We established the interrupted stay policy to address instances in 
which a patient is discharged from an LTCH and later readmitted to that 
LTCH within a certain amount of time. This kind of readmission to the 
LTCH represents a continuation or resumption of the initial, 
interrupted treatment, rather than a new admission. (For a discussion 
of our implementation of the interrupted stay policy, we refer readers 
to the RY 2003 LTCH PPS final rule (67 FR 56002).) We continue to 
believe that the interrupted stay policy serves as an effective 
instrument to protect the Medicare Trust Fund from significant and 
inappropriate expenditures (78 FR 50768), and we do not believe that 
the site neutral payment rate will address these concerns unless the 
interrupted stay policy is applied to site neutral payment rate cases 
in the same manner as it is applied to standard Federal payment rate 
cases.
    The 25-percent threshold payment adjustment policy was implemented 
based on analyses of Medicare discharge data that indicated that 
patterns of patient shifting appeared to be occurring more for provider 
financial advantage than for patient benefit. In order to discourage 
such activity, a payment adjustment was applied to LTCH discharges of 
patients who were admitted to the LTCH from the same referring hospital 
in excess of an applicable percentage threshold (79 FR 50185). We refer 
readers to the detailed discussions of the 25-percent threshold payment 
adjustment policy for LTCH hospital-within-hospitals (HwHs) and LTCH 
satellite facilities in the FY 2005 IPPS/LTCH final rule (69 FR 49191 
through 49214) and its application to all other LTCHs in the RY 2008 
LTCH PPS final rule (72 FR 26919 through 26944), as well as our 
discussion in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50185 through 
50187), for additional details on the 25-percent threshold payment 
adjustment. We do not believe that the site neutral payment rate will 
address these patient shifting concerns unless the 25-percent threshold 
payment adjustment is applied to site neutral payment rate cases in the 
same manner as it is applied to LTCH PPS standard Federal payment rate 
cases.
    In considering the potential policy proposals, we recognized that 
there is a current statutory moratorium on the full implementation of 
the 25-percent threshold payment adjustment policy under section 
1206(b)(1)(A) of Public Law 113-67 that is scheduled to expire in FY 
2016. (For a discussion of our implementation of the current statutory 
moratorium on the full implementation of the 25-percent threshold 
payment adjustment policy, we refer readers to the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50185 through 50187).) We are proposing to apply 
all of the payment adjustments to site neutral payment rates in the 
same manner as they are currently applied (and will continue to be 
applied for the foreseeable future) to LTCH PPS standard Federal 
payment rates--including, as applicable, the moratorium on implementing 
the 25-percent threshold payment adjustment.
    We are not proposing to apply the SSO payment adjustment to the 
site neutral payment rate at this time because, while the policy goal 
of ensuring patients in an LTCH receive a full course of treatment 
remains, under our current method of paying for SSOs as described under 
Sec.  412.529, we pay for SSOs based on the lowest of several payment 
options, one of which is the LTCH's estimated cost of the case. As 
described above, site neutral payment rate cases are paid the lower of 
the IPPS comparable per diem amount, or 100 percent of the estimated 
cost of the case. Because the estimated cost option is used in 
determining both SSO payments and site neutral payment rates and both 
methods make payment based on the lowest of their respective payment 
options, in most cases, applying our current SSO payment adjustment to 
site neutral payment rate cases would not affect the resulting LTCH PPS 
payment made for the discharge. We may consider proposing the 
application of an alternative SSO payment adjustment in the future if 
we find evidence that Medicare beneficiaries are not regularly 
receiving the full course of treatment when such treatment is paid for 
at the site neutral payment rate.
6. Proposals Relating to the LTCH Discharge Payment Percentage
    Section 1886(m)(6)(C) of the Act, as added by section 1206 of 
Public Law 113-67, imposes several requirements related to an LTCH's 
discharge payment percentage. As defined by section 1886(m)(6)(C)(iv) 
of the Act, the term ``LTCH discharge payment percentage'' is a ratio, 
expressed as a percentage, of Medicare discharges not paid the site 
neutral payment rate to total number of Medicare discharges occurring 
during the cost reporting period. In other words, an LTCH's discharge 
payment percentage would be the ratio of an LTCH's Medicare discharges 
that meet the criteria for exclusion from the site neutral payment rate 
(as described under proposed new Sec.  412.522(a)(2)) to an LTCH's 
total number of Medicare discharges paid under the LTCH PPS (that is, 
both Medicare discharges paid under the site neutral payment rate and 
those that meet the criteria for exclusion from the site neutral 
payment rate, as described under proposed new Sec.  412.522(a)(1) and 
(2), respectively) during the cost reporting period. Therefore, 
consistent with the statutory requirement at section 1886(m)(6)(C)(iv) 
of the Act and under the broad authority under section 123(a)(1) of the 
BBRA, as amended by section 307(b) of the BIPA, under proposed new 
Sec.  412.522(d)(1), we are proposing to define an LTCH's discharge 
payment percentage as a ratio, expressed as a percentage, of Medicare 
discharges excluded from the site neutral payment rate as described 
under proposed new Sec.  412.522(a)(2) to total Medicare discharges 
paid under the LTCH PPS (in accordance with 42 CFR part 412, subpart O) 
during the cost reporting period.
    In addition, section 1886(m)(6)(C)(i) of the Act requires that we 
provide notice to each LTCH of the LTCH's discharge payment percentage 
(as defined in section 1886(m)(6)(C)(iv) of the Act) for LTCH cost 
reporting periods beginning during or after FY 2016. Therefore, we are 
proposing to codify this statutory requirement at proposed new Sec.  
412.522(d)(2). Under this proposal, for cost reporting periods 
beginning on or after October 1, 2015, as required by the statute, we 
would inform each LTCH of their discharge payment percentage as defined 
under proposed new Sec.  412.522(d)(1). We plan to develop such a 
notification process through subregulatory guidance. We also note that, 
under section 1886(m)(6)(C)(ii) of the Act, for cost reporting periods 
beginning on or after October 1, 2020, the statute requires that any 
LTCH whose discharge payment percentage for the period is not at least 
50 percent will be informed of such a fact and all of the LTCH's 
discharges in each successive cost reporting period will be paid the 
payment amount that

[[Page 24535]]

would apply under subsection (d) for the discharge if the hospital were 
a subsection (d) hospital, subject to the process for reinstatement 
provided for by section 1886(m)(6)(C)(iii) of the Act. Because this 
statutory requirement is not effective until cost reporting periods 
beginning on or after October 1, 2020, we are not making any proposals 
related to the limitation requirement or the process for reinstatement 
at this time. However, we are inviting public comments on the 
development and implementation of the process for reinstatement under 
section 1886(m)(6)(C)(iii) of the Act.
7. Additional LTCH PPS Policy Considerations Related to the 
Implementation of the Site Neutral Payment Rate Required by Section 
1206(a) of Public Law 113-67
    As discussed earlier in this section, section 1206(a) of Public Law 
113-67 amended section 1886(m) of the Act by adding paragraph (6), 
which establishes patient-level criteria for payments made under the 
LTCH PPS for LTCH discharges occurring during cost reporting periods 
beginning on or after October 1, 2015 (FY 2016). In the FY 2015 IPPS/
LTCH PPS proposed and final rules, we stated our intent to implement 
the requirements established by section 1206(a) of Public Law 113-67 
through notice and comment rulemaking during the FY 2016 IPPS/LTCH PPS 
rulemaking cycle. In the FY 2015 IPPS/LTCH PPS proposed rule (79 FR 
28205 through 28206), we discussed several significant issues arising 
from the statutory changes to the LTCH PPS required by section 1206(a) 
of Public Law 113-67, which establishes two distinct payment groups for 
LTCH discharges under the revised system: Discharges meeting specified 
patient-level criteria that will be paid under the LTCH PPS standard 
Federal payment rate and all other patient discharges that will be paid 
under the site neutral payment rate. In that same proposed rule, we 
expressed our interest in receiving feedback from LTCH stakeholders on 
our plans to evaluate whether it would be appropriate to modify any of 
our historical policies or methodologies as we began to develop 
proposals to implement the statutory changes to the LTCH PPS. In 
particular, we solicited public feedback on the policies relating to 
the MS-LTC-DRG relative payment weights and high-cost outlier payments 
in preparation of developing proposals to implement the statutory 
changes to the LTCH PPS beginning in FY 2016. We explained that in 
setting the payment rates and factors under the LTCH PPS in accordance 
with requirements of section 1206(a) of Public Law 113-67, for certain 
LTCH PPS payment adjustments we planned to evaluate whether it would be 
appropriate to modify our historical methodology to account for the 
establishment of the two distinct payment rates for LTCH discharges. In 
particular, we stated our intent to examine whether, beginning in FY 
2016, it would continue to be appropriate to include data for all LTCH 
PPS cases, including site neutral payment rate cases, in the 
methodology used to set the MS-LTC-DRGs relative payment weights. We 
also stated our intent to explore the possibility of changes to the 
current LTCH PPS high-cost outlier payment policy. Given the fact that, 
for a number of LTCH discharges, payment would be made based on the 
lower site neutral payment rate (that is, the lesser of an ``IPPS 
comparable'' payment amount or 100 percent of the estimated cost of the 
case), we believed that it would be appropriate to evaluate whether a 
single high-cost outlier threshold could be applied to all LTCH PPS 
cases (both LTCH PPS standard Federal payment rate and site neutral 
payment rate cases), or whether it may be more appropriate to have 
separate high-cost outlier thresholds for each of the two payment rates 
under the statutory revisions to the LTCH PPS.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50197 through 
50198), we summarized the comments we received in response to our 
request for input from LTCH stakeholders. As we stated in that same 
final rule, we appreciated the commenters' thoughtful and detailed 
feedback, particularly those comments regarding the MS-LTC-DRG relative 
payment weights and the high-cost outlier policy under the new LTCH PPS 
dual-rate payment structure established by section 1206(a) of Public 
Law 113-67. In developing the proposals presented in this proposed 
rule, we considered the recommendations and information provided by 
those commenters. Below we discuss our policy proposals related to the 
MS-LTC-DRG payment relative weights and high-cost outlier policy in 
regard to our proposed implementation policies under the LTCH PPS dual-
rate payment structure required by section 1206(a) of Public Law 113-
67.
a. MS-LTC-DRG Relative Payment Weights
    Under the LTCH PPS, relative payment weights for each MS-LTC-DRG 
are a primary element used to account for the variations in cost per 
discharge and resource utilization between the diagnosis-related groups 
(Sec.  412.515). Each year, based on the latest available LTCH claims 
data, we calculate a relative payment weight for each MS-LTC-DRG that 
represents the resources used for an average inpatient LTCH case 
assigned to that MS-LTC-DRG to ensure that Medicare patients with 
conditions or illnesses classified under each MS-LTC-DRG have access to 
an appropriate level of services and to encourage efficiency (79 FR 
50170). CMS adjusts the classifications and weighting factors annually 
to reflect changes in factors affecting the relative use of hospital 
resources, such as treatment patterns, technology, and the number of 
discharges (Sec.  412.517).
    Under the new statutory LTCH PPS structure, section 1206(a) of 
Public Law 113-67 establishes two distinct payment rates for LTCH 
discharges: Discharges meeting specified patient-level criteria that 
will be excluded from the site neutral payment rate and all other 
patient discharges that will be paid under the site neutral payment 
rate. As discussed in greater detail in section VII.B.4.c. of the 
preamble of this proposed rule, under proposed new Sec.  412.522(a)(2), 
we are proposing to pay for LTCH discharges that meet the criteria for 
exclusion from site neutral payment rate using the LTCH PPS standard 
Federal payment rate described under Sec.  412.523, as adjusted. In 
other words, LTCH discharges that meet the specified patient-level 
criteria would continue to be paid at what we refer to as the ``LTCH 
PPS standard Federal payment rate.'' In general, the LTCH PPS standard 
Federal payment rate is calculated by adjusting the LTCH PPS standard 
Federal payment rate by the applicable MS-LTC-DRG relative payment 
weight for that Medicare cases. Under proposed new Sec.  412.522(c) (as 
discussed in greater detail in section VII.B.4.a. of the preamble of 
this proposed rule), consistent with section 1886(m)(6)((B)(ii) of the 
Act, we are proposing that the site neutral payment rate is the lower 
of the IPPS comparable per diem amount (including any applicable 
outlier payments), or 100 percent of the estimated cost of the case. 
Under this proposal, the IPPS comparable per diem amount would be 
determined using the same method to determine SSO payments under the 
SSO policy at Sec.  412.529(d)(4), and the estimated cost of the case 
would be determined using the same method to determine estimated costs 
under the SSO policy at Sec.  412.529(d)(2). We note that the proposed 
methodology for determining payments for site neutral payment rate 
cases does not use the LTCH PPS standard Federal payment

[[Page 24536]]

rate or the applicable MS-LTC-DRG relative payment weights.
    As discussed above, in preparation for this proposed rule, we 
considered LTCH stakeholder input and evaluated whether it would be 
appropriate to modify our historical MS-LTC-DRG relative payment weight 
methodology to account for the establishment of the two distinct 
payment rates for LTCH discharges under the statutory changes to the 
LTCH PPS. Specifically, we examined whether our historical methodology, 
which uses data from all LTCH PPS discharges, should be continued when 
we calculate the MS-LTC-DRG relative payment weights under the new LTCH 
PPS dual-rate payment structure, or whether it would be more 
appropriate to limit the data used to calculate relative payment 
weights to that obtained from discharges paid based on the LTCH PPS 
standard Federal payment rate. Our existing methodology for developing 
the MS-LTC-DRG relative payment weights includes established policies 
related to the data used to calculate the relative payment weights, the 
hospital-specific relative value methodology, the treatment of severity 
levels in the MS-LTC-DRGs, the low-volume and no-volume MS-LTC-DRGs, 
adjustments for nonmonotonicity, and the calculation of the MS-LTC-DRG 
relative payment weights with a budget neutrality factor (79 FR 50171). 
Our most recent discussion of the existing methodology for calculating 
the MS-LTC-DRG relative payment weights can be found in the FY 2015 
IPPS/LTCH final rule (79 FR 50168 through 50176). Our proposed 
methodology for calculating the FY 2016 MS-LTC-DRG relative payment 
weights (including a proposal to use only data from the LTCH PPS 
standard Federal payment rate cases) is discussed in section VII.C.3. 
of the preamble of this proposed rule.
    In response to our solicitation for stakeholder input included in 
the FY 2015 IPPS/LTCH PPS proposed rule, we received numerous comments 
that addressed the calculation of the MS-LTC-DRG relative payment 
weights under the new statutory LTCH PPS structure. In its comment, 
MedPAC urged CMS to establish ``. . . new relative payment weights for 
each MS-LTC-DRG based solely on the most recent available standardized 
data associated with discharges meeting the specified patient-level 
criteria'' because those discharges under the new law would represent 
cases treating the most severely ill, incurring higher resource costs 
that warrant higher LTCH payments. MedPAC also stated that the change 
in methodology should not result in increased aggregate payments for 
the cases paid under the LTCH PPS standard Federal payment rate under 
the new statutory LTCH PPS structure. Most of the other commenters 
agreed with MedPAC's recommendation that the MS-LTC-DRG relative 
payment weights under the new statutory structure should be calculated 
using only the data from cases that meet the statutory patient-level 
criteria for exclusion from the site neutral payment rate (that is, 
LTCH PPS standard Federal payment rate cases), without including data 
from cases paid the site neutral payment rate. A few commenters 
conducted their own analyses and found that both relative payment 
weight approaches (that is, using data from all LTCH PPS cases as 
compared to using only data from standard Federal payment rate cases) 
produce MS-LTC-DRG relative payment weights that are similar. In 
addition, some of the commenters urged CMS to focus on keeping payments 
for LTCH PPS standard Federal payment rate cases at the same level that 
would have been in the absence of the statutory changes, or otherwise 
consider employing a methodology that promotes stability and 
predictability in the MS-LTC-DRG relative payment weights. Therefore, 
the overwhelming majority of the preliminary stakeholder feedback we 
received did not support using data from all LTCH PPS cases to 
determine the MS-LTC-DRG relative payment weights for the LTCH PPS 
standard Federal payment rate cases.
    We appreciate the commenters' detailed feedback and have taken into 
consideration their concerns and recommendations in our evaluation the 
issue of the MS-LTC-DRG relative payment weights under the new LTCH PPS 
structure required by section 1206(a) of Public Law 113-67. As part of 
our evaluation, we examined the FY 2013 LTCH claims data used to 
determine the FY 2015 MS-LTC-DRG relative weights and found that 
approximately 54 percent of LTCH cases would meet the criteria for 
exclusion from the site neutral payment rate (that is, those cases 
would be paid the LTCH PPS standard Federal payment rate) and 
approximately 46 percent of LTCH cases would be paid the site neutral 
payment rate. We then compared the MS-LTC-DRG relative payment weights 
computed using data from all LTCH PPS cases to the MS-LTC-DRG relative 
payment weights computed using only data from the LTCH PPS standard 
Federal payment rate cases. Specifically, using the FY 2013 LTCH claims 
data (the same LTCH claims data used in the FY 2015 IPPS/LTCH PPS final 
rule), we calculated FY 2015 MS-LTC-DRG relative payment weights using 
only data from the 54 percent of LTCH PPS cases that would be paid the 
LTCH PPS standard Federal payment rate, and compared them to the FY 
2015 MS-LTC-DRG relative payment weights established in Table 11 of the 
FY 2015 IPPS/LTCH PPS final rule, which were calculated using data from 
all LTCH cases (that is, both LTCH PPS standard Federal payment rate 
cases and site neutral payment rate cases). Similar to results found by 
industry stakeholders, we found that both approaches produced 
comparable MS-LTC-DRG payments for LTCH PPS standard Federal payment 
rate cases. For example, our analysis of the average MS-LTC-DRG 
relative payment weight (that is, the case-mix) of LTCH PPS cases that 
would be paid the LTCH PPS standard Federal payment rate showed that 
the average case-mix using relative payment weights determined from 
using only data from LTCH PPS standard Federal payment rate cases 
differed by only approximately 0.01 percentage point from the average 
case-mix of those same cases using relative weights determined from 
data from all LTCH PPS cases.
    However, as discussed in more detail in section VII.B.7.b. of the 
preamble of this proposed rule, where we present our proposals 
regarding outlier payments for site neutral payment rate cases, we 
believe that the costs and resource use for cases paid at the site 
neutral payment rate in the future may be lower on average than the 
costs and resource use for LTCH cases in our historical data that would 
have been paid at the site neutral payment rate if the statutory 
changes were in place when the discharges occurred. We believe that 
this is likely, even if the proportion of site neutral payment rate 
cases in future data remains similar to the historical data (that is, 
46 percent). Therefore, even though the above analysis shows that 
including or excluding what would have been site neutral payment rate 
cases if the new statutory requirements were applied to the historical 
discharges would not have much impact on the relative payment weight 
calculation for FY 2016, over time we believe that the relative payment 
weights could become distorted if future site neutral payment rate 
cases involve less intensive resource use and lower costs, which we 
believe is a plausible response to the lower site neutral payment rates 
under the statutory LTCH PPS changes. This also could lead to less 
stability in the

[[Page 24537]]

MS-LTC-DRG relative payment weights because these cases become 
incorporated into data used to calculate the relative payment weights.
    Taking all of this information into account and given the comments 
we received on this issue in the FY 2015 rulemaking cycle, we believe 
that computing the MS-LTC-DRG relative payment weights using only data 
from LTCH PPS cases that would have been (or, in the future, are) paid 
the LTCH PPS standard Federal payment rate (that is, cases that meet 
the criteria for exclusion from the site neutral payment rate) would 
result in the most appropriate payments under the new statutory 
structure. Therefore, in this proposed rule, we are proposing that, 
beginning with FY 2016, the annual recalibration of the MS-LTC-DRG 
relative payment weighting factors would be determined using only data 
from LTCH discharges that meet the criteria for exclusion from the site 
neutral payment rate (that is, LTCH PPS standard Federal payment rate 
cases). Under our proposal, the MS-LTC-DRG relative payment weights 
would not be used to determine the LTCH PPS payment for cases paid the 
site neutral payment rate, and (in general) site neutral payment rate 
cases would be paid an IPPS comparable per diem amount (or 100 percent 
of the estimated cost of the case, if lower), which in most instances 
would be lower than the LTCH PPS standard Federal payment rate.
    As discussed above, several commenters also stated that payments 
for LTCH PPS standard Federal payment rate cases should be held at the 
same payment level that they would have been in the absence of the 
statutory changes. That is, any proposed changes in methodology should 
not result in any change (increase or decrease) in aggregate payments 
for LTCH PPS standard Federal payment rate cases under the new 
statutory LTCH PPS structure. As discussed in section VII.C.3. of the 
preamble of this proposed rule, under the existing LTCH PPS regulations 
at Sec.  412.517(b), we already have a budget neutrality requirement 
for the annual changes to the MS-LTC-DRG classifications and relative 
payment weights, which specifies that any such changes must be made in 
a budget neutral manner such that estimated aggregate LTCH PPS payments 
are not affected. We are proposing to continue to apply that provision 
because we believe that a budget neutrality requirement is appropriate 
for the MS-LTC-DRG relative payment weights that would be used to 
determine LTCH PPS payments for LTCH PPS standard Federal payment rate 
cases for the reasons discussed when the policy was originally adopted 
in the FY 2008 LTCH PPS final rule (72 FR 26880 through 26884). 
Therefore, we are not proposing any changes to the budget neutrality 
requirement at Sec.  412.517(b). Furthermore, in light of our proposals 
regarding the MS-LTC-DRG relative payment weighting factors, we are 
proposing to add paragraph (c) to Sec.  412.517 to specify that, 
beginning in FY 2016, the annual recalibration of the MS-LTC-DRG 
relative weighting factors are determined using data from LTCH 
discharges described under proposed new Sec.  412.522(a)(2). As 
discussed above, we believe that computing the MS-LTC-DRG relative 
payment weights using only data from LTCH PPS standard Federal payment 
rate cases would result in the most appropriate payments under the new 
statutory structure required by section 1206(a) of Public Law 113-67, 
and would provide stability and predictability in MS LTC-DRG payments 
for LTCH PPS standard Federal payment rate cases compared to current 
LTCH PPS payments.
b. High-Cost Outliers
    Under the LTCH PPS, the existing regulations at Sec.  412.525(a) 
provide for an additional adjustment to LTCH PPS payments to account 
for outlier cases that have extraordinarily high costs relative to the 
costs of most discharges (referred to as high-cost outliers (HCOs).) 
Providing such adjustments for HCOs strongly improves the accuracy of 
the LTCH PPS in determining resource costs at the patient and hospital 
level. In addition, HCO payments reduce the financial losses that would 
otherwise be incurred by hospitals when treating patients who require 
more costly care and, therefore, reduce the incentives to underserve 
these patients. Currently, we set the HCO threshold before the 
beginning of the payment year so that total estimated HCO payments are 
projected to equal 8 percent of estimated total payments under the LTCH 
PPS. Under our current HCO policy, an LTCH would receive an additional 
payment if the estimated cost of a case exceeds the adjusted LTCH PPS 
payment plus a fixed-loss amount. In such cases, the additional HCO 
payment amount is equal to 80 percent of the difference between the 
estimated cost of the case and the HCO threshold, which is the sum of 
the adjusted Federal MS-LTC-DRG prospective payment amount for the case 
and the fixed-loss amount. The fixed-loss amount is the amount used to 
limit the loss that an LTCH would incur under the HCO policy for a case 
with unusually high costs. This results in Medicare and the LTCH 
sharing financial risk in the treatment of extraordinarily costly 
cases. Under the HCO policy, the fixed-loss amount is the maximum loss 
that an LTCH can incur for a case with unusually high costs before 
receiving an additional payment amount. The additional payment amount 
under the LTCH PPS HCO policy is determined using a marginal cost 
factor, which is a fixed percentage of costs above the HCO threshold. 
The marginal cost factor under the LTCH PPS HCO policy is 80 percent.
    Under the current HCO policy, we annually determine a fixed-loss 
amount, that is, the maximum loss that an LTCH can incur under the LTCH 
PPS for a case with unusually high costs before an adjustment is made 
to the payment for the case. We do so by using the best available data 
to estimate aggregate LTCH PPS payments with and without a HCO policy, 
and, based on those estimates, set the fixed-loss amount at an amount 
that results in estimated total HCO payments being equal to 8 percent 
of estimated total LTCH PPS payments. Additional information on the 
LTCH PPS HCO methodology can be found in the FY 2003 LTCH PPS final 
rule (67 FR 56022 through 56027) and the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50398 through 50400).
    As discussed in the previous section, under the new statutory LTCH 
PPS structure, section 1206(a) of Public Law 113-67 establishes two 
distinct payment rates for LTCH discharges beginning in FY 2016. To 
implement this statutory change, under proposed new Sec.  
412.522(a)(2), we are proposing to pay for LTCH discharges that meet 
the criteria for exclusion from site neutral payment rate based on the 
LTCH PPS standard Federal payment rate, which includes HCO payments. 
Under proposed new Sec.  412.522(c), consistent with the statute, we 
are proposing that the site neutral payment rate is the lower of the 
IPPS comparable per diem amount as determined under existing Sec.  
412.529(d)(4) (including any applicable adjustments, such as outlier 
payments), or 100 percent of the estimated cost of the case as 
determined under existing Sec.  412.529(d)(2). Below we discuss our 
proposals for determining HCO payments under the new statutory LTCH PPS 
payment structure.
    In response to our solicitation for stakeholder input included in 
the FY 2015 IPPS/LTCH PPS proposed rule, we received numerous comments 
that addressed the HCO policy under the new statutory LTCH PPS 
structure. In its comment, MedPAC recommended that both LTCH PPS 
standard Federal rate

[[Page 24538]]

cases and site neutral payment rate cases receive HCO payments, and 
that estimated total HCO payments under the LTCH PPS continue to be 
projected to be equal to 8 percent of estimated total LTCH PPS payments 
for all cases (that is, both the LTCH PPS standard Federal payment rate 
cases and the site neutral payment rate cases). In contrast, most of 
the other commenters recommended that separate HCO fixed-loss amounts 
and separate HCO payment ``targets'' (that is, the projected percentage 
that estimated HCO payments are of estimated total payments) be 
determined for LTCH PPS standard Federal payment rate cases and site 
neutral payment rate cases. Specifically, these commenters recommended 
that we calculate a fixed-loss amount under the current HCO policy for 
LTCH PPS standard Federal payment rate cases using only data (and 
estimated payments) from what would have been or are LTCH PPS standard 
Federal payment rate cases, without including data (and estimated 
payments) from cases that would have been or are paid the site neutral 
payment rate. In addition, some of the commenters recommended initially 
applying the existing HCO policy separately to both LTCH PPS standard 
Federal payment rate cases and site neutral payment rate cases; that 
is, determining separate HCO fixed-loss amounts so that estimated HCO 
payments would be equal to 8 percent of estimated total payments for 
each of the two LTCH PPS payment types (the LTCH PPS standard Federal 
payment rate cases and site neutral payment rate cases), respectively, 
and then adjusting the HCO targets as more data under the statutory 
revisions to the LTCH PPS become available. In other words, commenters 
suggested that it may be more appropriate to have different HCO targets 
for the two LTCH PPS payment types rather than two HCO targets of 8 
percent. When making recommendations regarding the HCO policy under the 
statutory LTCH PPS changes, several commenters urged CMS to focus on 
maintaining LTCH PPS payments for LTCH PPS standard Federal payment 
rate cases at the same payment level as they are currently under the 
LTCH PPS, including the level of HCO payments, and to mitigate any 
instability in the HCO fixed-loss amount for LTCH PPS standard Federal 
payment rate cases.
    Several commenters conducted independent analyses that looked at 
separate HCO fixed-loss amounts for LTCH PPS standard Federal payment 
rate cases and site neutral payment rate cases. Upon review of their 
analyses, these commenters specifically recommended that separate HCO 
fixed-loss amounts be used for the two LTCH PPS payment types. A few of 
the commenters' analyses included assumptions about LTCH behavioral 
response to statutory changes to the LTCH PPS (such as changes in 
patient volume and costs). A few commenters indicated that using 
historical data would not reflect the anticipated behavioral response 
as a result of the new statutory payment structure and, therefore, may 
lead to an overestimation of costs and HCO payments (particularly with 
regard to payments for site neutral payment rate cases), resulting in a 
fixed-loss amount that is set too high relative to the HCO target. If 
this were to occur, these commenters expressed concern that LTCHs would 
be ``underpaid'' because HCO payments are budget neutral and actual HCO 
payments would fall below the HCO payments target.
    We appreciate the commenters' detailed feedback and have taken 
their concerns and recommendations into consideration while framing our 
proposed HCO policy under the new statutory LTCH PPS structure. As we 
always have for the LTCH PPS, we designed our proposed HCO policy under 
the new statutory structure to achieve a balance of the following 
goals: To reduce financial risk, reduce incentives to underserve costly 
beneficiaries, and improve the overall fairness of the PPS (67 FR 
56023). With these goals in mind, we evaluated whether it would be 
appropriate to modify our current HCO policy to account for the 
establishment of the new LTCH PPS dual-rate payment structure. This 
included examining whether our current HCO target, under which we set a 
single fixed-loss amount so that estimated total HCO payments are 
projected to equal 8 percent of estimated total LTCH PPS payments, 
should continue to be used upon implementation of the statutory LTCH 
PPS payment changes, or whether it would be more appropriate to have 
two separate HCO targets (one for LTCH PPS standard Federal payment 
rate cases and one for site neutral payment rate cases).
    In examining this issue, we considered how LTCH discharges based on 
historical claims data would have been classified under the new dual-
rate LTCH PPS payment structure and the CMS' Office of the Actuary 
(OACT) projections regarding how LTCHs would likely respond to our 
proposed implementation of policies resulting from the statutory 
payment changes. For FY 2016, our actuaries currently project that the 
proportion of cases that would qualify as LTCH PPS standard Federal 
payment rate cases versus site neutral payment rate cases under the new 
statutory provisions would remain consistent with what is reflected in 
the historical LTCH PPS claims data. (As previously noted, based on FY 
2013 LTCH claims data, we found that approximately 54 percent of LTCH 
cases would have been paid the LTCH PPS standard Federal payment rate 
and approximately 46 percent of LTCH cases would have been paid the 
site neutral payment rate if those rates had been in effect at that 
time.) While our actuaries do not project an immediate change in these 
proportions, they do project cost and resource changes to take into 
account the lower payment rates. Our actuaries also project that the 
costs and resource use for cases paid at the site neutral payment rate 
would likely be lower, on average, than the costs and resource use for 
cases paid at the LTCH PPS standard Federal payment rate and would 
likely mirror the costs and resource use for IPPS cases assigned to the 
same MS-DRG, regardless of whether the proportion of site neutral 
payment rate cases in the future remains similar to what is found based 
on the historical data. This actuarial assumption is based on our 
expectation that site neutral payment rate cases would generally be 
paid based on an IPPS comparable per diem amount under the statutory 
LTCH PPS payment changes, which, in the majority of cases, is much 
lower than the payment that would have been paid if these statutory 
changes were not enacted. These assumptions are consistent with 
statements from several commenters who noted that the type of site 
neutral payment rate cases may change in cost and severity over time in 
response to the new statutory payment structure because the payment for 
those cases would generally be lower than the current payment made 
under the LTCH PPS for these types of cases.
    In light of these projections and expectations, we believe that the 
use of a single fixed-loss amount and HCO target for all LTCH PPS cases 
would be problematic. Currently, the FY 2015 LTCH PPS fixed-loss amount 
is $14,972, which was determined using FY 2013 LTCH claims data (79 FR 
50400). The FY 2015 IPPS fixed-loss amount is $25,799 (79 FR 50374). A 
single fixed-loss amount and target under the LTCH PPS would allow LTCH 
cases paid at the site neutral payment rate to qualify for HCO payments 
much more easily than comparable IPPS cases assigned to the same MS-
DRG. This would occur

[[Page 24539]]

because the HCO threshold (which is generally the sum of the adjusted 
Federal PPS payment for the case and the fixed-loss amount) under the 
IPPS would be higher than the HCO threshold under the LTCH PPS for a 
case assigned to the same MS-DRG (which would be expected to have a 
comparable adjusted Federal PPS payment, costs and resource use to a 
case paid as a LTCH PPS site neutral payment rate case). While we 
recognize that differing statutory requirements between the two payment 
systems result in comparable LTCH PPS site neutral payment rate cases 
and IPPS cases not being paid exactly the same amount, we do not 
believe that it would be appropriate for comparable LTCH PPS site 
neutral payment rate cases to receive dramatically different HCO 
payments from those cases that would be paid under the IPPS. Based on 
the FY 2015 figures, an IPPS hospital would have to absorb 
approximately $11,000 more in additional estimated costs than the LTCH 
treating a comparable case based on the difference between the IPPS 
fixed-loss amount of $25,799 and the LTCH PPS fixed-loss amount of 
$14,792 before it would begin to receive HCO payments. We believe that 
the most appropriate fixed-loss amount for site neutral payment rate 
cases under the LTCH PPS for a given fiscal year beginning with FY 2016 
would be the IPPS fixed-loss amount for that fiscal year. Therefore, 
for FY 2016, we are proposing a fixed-loss amount for site neutral 
payment rate cases of $24,485, which is the same proposed FY 2016 IPPS 
fixed-loss amount discussed in section II.A.4.g.(1) of the Addendum to 
this proposed rule. We believe that this proposed policy would reduce 
differences between HCO payments for similar cases under the IPPS and 
site neutral payment rate cases under the LTCH PPS and promote fairness 
between the two systems. We also are proposing to make a payment 
adjustment for HCOs paid under the site neutral payment rate at a rate 
equal to 80 percent of the difference between the estimated cost of the 
case and the proposed IPPS HCO threshold, which is consistent with the 
current LTCH PPS HCO policy. The proposed IPPS HCO threshold for site 
neutral payment rate cases would be the sum of the LTCH PPS payment for 
such cases and the proposed IPPS fixed-loss amount of $24,485. In light 
of these proposals, we note that any site neutral payment rate case 
that is paid 100 percent of the estimated cost of the case because that 
amount is lower than the IPPS comparable per diem amount would never be 
eligible to receive a HCO payment because, by definition, the estimated 
costs of such cases would never exceed the IPPS comparable amount by 
any threshold.
    Having established the IPPS fixed-loss amount as an appropriate 
threshold to propose for HCOs paid under the site neutral payment rate, 
we next examined how to establish an appropriate fixed-loss amount and 
HCO target for LTCH PPS standard Federal payment rate cases. With that 
said, we agree with the commenters who recommended that we establish a 
fixed-loss amount and target for LTCH PPS standard Federal payment rate 
cases using the current LTCH PPS HCO policy, but limiting the data used 
under that policy to what would have been LTCH PPS standard Federal 
payment rate cases if the statutory changes had been in effect at the 
time of those discharges. We agree with the commenters that believed 
that this policy would result in increased stability over time with 
respect to HCO payments for the LTCH PPS standard Federal payment rate 
cases. We also believe that this approach would meet the goals cited 
for our current HCO policy; that is, reducing financial risk, reducing 
incentives to underserve costly beneficiaries, and improving the 
overall fairness of the LTCH PPS (67 FR 56023). Therefore, we are not 
proposing any modifications to the HCO methodology as it applies to 
LTCH PPS standard Federal payment rate cases other than determining a 
fixed-loss amount using only data from LTCH PPS standard Federal 
payment rate cases. Specifically, under our proposal, LTCH PPS standard 
Federal payment rate cases as described under proposed new Sec.  
412.522(a)(2) would receive an additional payment for an HCO case that 
is equal to 80 percent of the difference between the estimated cost of 
the case and the HCO threshold, which would be the sum of the LTCH PPS 
payment for the LTCH PPS standard Federal payment rate case and the 
fixed-loss amount for such cases. The fixed-loss amount for LTCH PPS 
standard Federal payment rate cases would continue to be determined so 
that estimated HCO payments would be projected to be equal to 8 percent 
of estimated total LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases.
    In this proposed rule, to codify our proposed changes to the HCO 
policy to account for the new statutory dual-rate LTCH PPS payment 
structure, we are proposing to revise paragraphs (a)(1), (a)(2), and 
(a)(3), and add a new paragraph (a)(4) to existing Sec.  412.525. In 
existing Sec.  412.525 (a)(1), (a)(2), and (a)(3), we are proposing to 
make technical changes to the existing language to make it clear that 
the provisions in those paragraphs apply to LTCH discharges under both 
LTCH PPS payment rates (that is, site neutral payment rate cases as 
described at proposed new Sec.  412.522(a)(1) and the standard Federal 
payment rate cases as described at proposed new Sec.  412.522(a)(2)). 
Under the proposed added paragraph (a)(4) to Sec.  412.524, we also are 
proposing to specify what the terms ``applicable LTCH PPS prospective 
payment'' and ``applicable fixed-loss amount'' mean for purposes of 
this paragraph. Specifically, we are proposing that, for purposes of 
Sec.  412.525(a), ``applicable LTCH PPS prospective payment'' would 
mean either the site neutral payment rate under proposed new Sec.  
412.522(c) for LTCH discharges described under proposed new Sec.  
412.522(a)(1) or the standard Federal prospective payment rates under 
Sec.  412.523 for LTCH discharges described under proposed new Sec.  
412.522(a)(2). Similarly, we are proposing that, for purposes of Sec.  
412.525(a), ``applicable fixed-loss amount'' would mean either, for 
LTCH described under proposed new Sec.  412.522(a)(1), the fixed-loss 
amount established for such cases, or, for LTCH discharges described 
under proposed new Sec.  412.522(a)(2), the fixed-loss amount 
established for such cases. In addition, we are proposing to add 
language to paragraph (a) of Sec.  412.525 to clarify that the fixed-
loss is the maximum loss that a LTCH can incur under the LTCH PPS for a 
case with unusually high costs ``before receiving an additional 
payment,'' and is not the maximum loss an LTCH can incur. We are 
proposing to make this clarification to highlight that the additional 
payment under the HCO policy is 80 percent (not 100 percent) of the 
estimated costs above the outlier threshold (that is, the sum of the 
applicable LTCH PPS prospective payment and the applicable fixed-loss 
amount).
    The current LTCH PPS HCO policy has a budget neutrality requirement 
in which the LTCH PPS standard Federal payment rate is reduced by an 
adjustment factor to account or the estimated proportion of HCO 
payments to total estimated LTCH PPS payments, that is, 8 percent. (We 
refer readers to Sec.  412.523(d)(1) of the regulations.) This budget 
neutrality requirement is intended to ensure that the HCO policy would 
not result in any change in estimated aggregate LTCH PPS payments. 
Under our proposal to continue to apply the current HCO methodology as 
it relates to LTCH PPS

[[Page 24540]]

standard Federal payment rate cases (other than determining a fixed-
loss amount using only data from LTCH PPS standard Federal payment rate 
cases), we also would continue to apply the current budget neutrality 
requirement (described above). In accordance with the current LTCH PPS 
HCO policy budget neutrality requirement, we believe that the HCO 
policy for site neutral payment rate cases should also be budget 
neutral, meaning that the proposed site neutral payment rate HCO 
payments should not result in any change in estimated aggregate LTCH 
PPS payments. In order to achieve this, under proposed new Sec.  
412.522(c)(2)(i), we are proposing to apply a budget neutrality factor 
to the payment for all site neutral payment rate cases described under 
proposed new Sec.  412.522(a)(1), which would also be established on an 
estimated basis. This approach is consistent with the HCO policy 
proposed for LTCH PPS standard Federal payment rate cases, which is 
budget neutral within the universe of LTCH PPS standard Federal payment 
rate cases. We are inviting public comments on this proposed approach 
and the alternative approach of applying a single budget neutrality 
factor to all LTCH PPS cases, irrespective of the site neutral payment 
rate.
    In order to estimate the magnitude a proposed budget neutrality 
adjustment under our proposed HCO payment budget neutrality requirement 
for site neutral payment rate cases, we again relied on the assumption 
by our actuaries that site neutral payment rate cases would have 
lengths of stay and costs comparable to IPPS cases assigned to the same 
MS-DRG. Under the IPPS, the fixed-loss amount is estimated based on a 
5.1 percent target (79 FR 50378). In accordance with section 
1886(d)(5)(A)(iv) of the Act, estimated operating IPPS HCO payments for 
any year are projected to be at least 5 percent, but no more than 6 
percent of estimated total operating DRG payments, which does not 
include IME and DSH payments plus HCO payments. When setting the HCO 
threshold, we historically compute a 5.1 percent target by dividing the 
total operating IPPS HCO payments by the total operating IPPS DRG 
payments plus operating IPPS HCO payments (79 FR 50374). We believe 
that it would be reasonable to set the site neutral payment rate case 
HCO target at the IPPS HCO target because these cases are expected to 
have lengths of stay and costs comparable to IPPS cases assigned to the 
same MS-DRG. Furthermore, using the IPPS fixed-loss threshold for the 
site neutral payment rate cases would be expected to result in HCO 
payments for site neutral payment rate cases that are similar in 
proportion as is seen in IPPS cases assigned to the same MS-DRG; that 
is, 5.1 percent. We recognize that, given the uncertainty surrounding 
the site neutral payment rate case population under the revised LTCH 
PPS and differences between the relative utilization of the MS-DRGs and 
MS-LTC-DRGs between the two systems, this prediction may not take 
effect. However, we must begin somewhere, and this proposed policy 
seems to be the best budget neutrality option at this time based on the 
information available to ensure LTCH PPS spending does not 
inappropriately increase under our proposal for site neutral payment 
rate HCO cases. As with all of our policies, we will continue to 
monitor HCOs payments under the LTCH PPS and, as necessary, propose 
modifications to this proposed method as needed based on what is 
observed during the implementation process.
    Therefore, under proposed new Sec.  412.522(c)(2)(i), we are 
proposing to adjust payments to site neutral payment rate cases (that 
is, LTCH PPS discharges described under proposed new Sec.  
412.522(a)(1)) by a budget neutrality factor so that the estimated HCO 
payments payable to site neutral payment rate cases do not result any 
increase in aggregate LTCH PPS payments. As discussed in greater detail 
in section V.D.4. of the Addendum to this proposed rule, in estimating 
total LTCH PPS payments in Federal FY 2016, we are proposing an 
adjustment to account for the varying effective dates of the statutory 
LTCH PPS payment changes required by section 1886(m)(6) of the Act, as 
amended by section 1206 of Public Law 113-67, which are effective for 
discharges occurring in cost reporting periods beginning on or after 
October 1, 2015.
    In addition to the proposed changes to the existing HCO policy 
under Sec.  412.525(a) and the budget neutrality adjustment to account 
for site neutral payment rate HCO payments under proposed Sec.  
412.522(c)(2)(i), we are proposing to make conforming changes to 
existing Sec.  412.523 under paragraph (d)(1) to specify that the HCO 
target of 8 percent in that provision only applies to HCO payments 
under Sec.  412.525(a) as they relate to LTCH PPS standard Federal 
payment rate cases; that is, HCO payments made for discharges described 
under proposed new Sec.  412.522(a)(2) and not all HCO payments 
described under proposed new Sec.  412.525(a).
    In summary, in this proposed rule, we are proposing to have 
separate HCO fixed-loss amounts and HCO targets (and corresponding 
budget neutrality adjustments) for site neutral payment rate cases and 
LTCH PPS standard Federal payment rate cases, respectively, under the 
new LTCH PPS dual-rate payment structure. For the reasons discussed 
above, we believe that separate and independent HCO fixed-loss amounts 
for each of the two types of LTCH PPS cases would result in the most 
appropriate payments under the LTCH PPS and achieve the stated goals of 
our HCO policy. In accordance with our proposed HCO policy for LTCH PPS 
standard Federal payment rate cases and site neutral payment rate 
cases, we are proposing that, beginning with FY 2016, our current HCO 
policy would apply to LTCH PPS standard Federal payment rate cases, 
such that LTCH PPS standard Federal payment rate cases would receive an 
additional payment for an HCO case that is equal to 80 percent of the 
difference between the estimated cost of the case and the LTCH PPS 
standard Federal payment HCO threshold (which would be the sum of the 
LTCH PPS standard Federal payment rate for the case and the fixed-loss 
amount for such cases). The fixed-loss amount for LTCH PPS standard 
Federal payment rate cases would continue to be determined so that 
estimated HCO payments would be projected to equal 8 percent of 
estimated total LTCH PPS payments for LTCH PPS standard Federal payment 
rate cases. To maintain budget neutrality, the LTCH PPS standard 
Federal payment rate would continue to be adjusted by 8 percent to 
account for the estimated HCO payments to LTCH PPS standard Federal 
payment rate cases. Similarly, we are proposing that site neutral 
payment rate cases would receive an additional payment for an HCO case 
that is equal to 80 percent of the difference between the estimated 
cost of the case and the site neutral payment rate HCO threshold, which 
would be the sum of site neutral payment rate for the case and the 
fixed-loss amount for such cases. For site neutral payment rate cases, 
we are proposing to use the fixed-loss amount determined annually under 
the IPPS HCO policy, and we estimate that this would result in an 
estimated proportion of HCO payments to total LTCH PPS payments for 
site neutral payment rate cases of 5.1 percent. We are proposing that 
HCO payments to site neutral payment rate cases would be budget 
neutral, consistent with the current LTCH PPS HCO policy. To maintain 
budget neutrality, we are proposing to apply a budget neutrality factor 
to the LTCH PPS payments for

[[Page 24541]]

site neutral payment rate cases. To codify the proposals discussed in 
this section, we are proposing to make changes to the existing HCO 
policy under Sec.  412.525(a) and conforming changes to existing Sec.  
412.523(d)(1), as well as a budget neutrality requirement for HCO 
payments to site neutral payment rate cases under proposed new Sec.  
412.522(c)(2)(i).
c. Limitation on Charges to Beneficiaries
    In accordance with existing regulations and for the consistency 
with other established hospital prospective payment systems polices, we 
are proposing to revise Sec.  412.507 to establish allowable charges to 
Medicare beneficiaries whose discharge from the LTCH is paid under the 
site neutral payment rate (as described in section VII.B.4. of the 
preamble of this proposed rule). Section 1206(a)(1) of Public Law 113-
67 requires that, beginning with cost reporting periods occurring on or 
after October 1, 2015, all LTCH discharges be paid at the applicable 
site neutral payment rate unless certain criteria are met. In general, 
the site neutral rate payment would be based on the lesser of 100 
percent of the estimated cost of the case or the IPPS comparable per 
diem amount (as discussed more detail in section VII.B.4.a. of the 
preamble of this proposed rule). We believe that, in general, the LTCH 
PPS payment an LTCH receives at the site neutral payment rate 
represents a full payment for purposes of determining allowable 
beneficiary charges for covered services. As such, using the broad 
authority conferred upon the Secretary under section 123(a)(1) of the 
BBRA, as amended by section 307(b) of the BIPA, we are proposing to 
revise Sec.  412.507 to limit allowable charges to beneficiaries. 
Specifically, we are proposing that, if Medicare has paid the full site 
neutral payment rate for a discharge, an LTCH may only charge the 
beneficiary applicable deductibles and copay amounts until the high-
cost outlier threshold is met. In addition, we are proposing to revise 
the terminology used under Sec.  412.507 to differentiate between cases 
paid under the site neutral payment rate and those paid under the LTCH 
PPS standard Federal payment rate. We note that under this proposed 
revision, for a case paid under the site neutral payment rate, that 
payment applies to the LTCH's costs for services furnished until the 
high-cost outlier threshold is met, and LTCHs may charge the 
beneficiary for noncovered services in the same manner as if the case 
were paid under the LTCH PPS standard Federal payment rate, as 
specified under existing Sec.  412.507. We are not proposing additional 
changes to our current provisions limiting charges to beneficiaries for 
discharges paid as SSO cases because, as explained in section VII.B.5. 
of the preamble of this proposed rule, we are not proposing to adopt 
any SSO payment adjustment policies for discharges paid under the site 
neutral payment rate at this time. We believe that these proposals 
concerning the limitation on charges to beneficiaries are in accordance 
with existing regulations and consistent with other established 
hospital payment systems policies.

C. Proposed Medicare Severity Long-Term Care Diagnosis-Related Group 
(MS-LTC-DRG) Classifications and Relative Weights for FY 2016

1. Background
    Section 123 of the BBRA required that the Secretary implement a PPS 
for LTCHs to replace the cost-based payment system under TEFRA. Section 
307(b)(1) of the BIPA modified the requirements of section 123 of the 
BBRA by requiring that the Secretary examine the feasibility and the 
impact of basing payment under the LTCH PPS on the use of ``existing 
(or refined) hospital DRGs that have been modified to account for 
different resource use of LTCH patients.''
    When the LTCH PPS was implemented for cost reporting periods 
beginning on or after October 1, 2002, we adopted the same DRG patient 
classification system utilized at that time under the IPPS. As a 
component of the LTCH PPS, we refer to this patient classification 
system as the ``long-term care diagnosis-related groups (LTC-DRGs).'' 
Although the patient classification system used under both the LTCH PPS 
and the IPPS are the same, the relative weights are different. The 
established relative weight methodology and data used under the LTCH 
PPS result in relative weights under the LTCH PPS that reflect ``the 
differences in patient resource use . . .'' of LTCH patients (section 
123(a)(1) of the BBRA (Pub. L. 106-113)).
    As part of our efforts to better recognize severity of illness 
among patients, in the FY 2008 IPPS final rule with comment period (72 
FR 47130), the MS-DRGs and the Medicare severity long-term care 
diagnosis-related groups (MS-LTC-DRGs) were adopted under the IPPS and 
the LTCH PPS, respectively, effective beginning October 1, 2007 (FY 
2008). For a full description of the development, implementation, and 
rationale for the use of the MS-DRGs and MS-LTC-DRGs, we refer readers 
to the FY 2008 IPPS final rule with comment period (72 FR 47141 through 
47175 and 47277 through 47299). (We note that, in that same final rule, 
we revised the regulations at Sec.  412.503 to specify that for LTCH 
discharges occurring on or after October 1, 2007, when applying the 
provisions of 42 CFR part 412, subpart O applicable to LTCHs for policy 
descriptions and payment calculations, all references to LTC-DRGs would 
be considered a reference to MS-LTC-DRGs. For the remainder of this 
section, we present the discussion in terms of the current MS-LTC-DRG 
patient classification system unless specifically referring to the 
previous LTC-DRG patient classification system that was in effect 
before October 1, 2007.)
    The MS-DRGs adopted in FY 2008 represent an increase in the number 
of DRGs by 207 (that is, from 538 to 745) (72 FR 47171). The MS-DRG 
classifications are updated annually. There are currently 753 MS-DRG 
groupings. For FY 2016, there would be 758 MS-DRG groupings if we 
finalize all of the proposed changed discussed in section II.G. of the 
preamble of this proposed rule. Consistent with section 123 of the 
BBRA, as amended by section 307(b)(1) of the BIPA, and Sec.  412.515 of 
the regulations, we use information derived from LTCH PPS patient 
records to classify LTCH discharges into distinct MS-LTC-DRGs based on 
clinical characteristics and estimated resource needs. We then assign 
an appropriate weight to the MS-LTC-DRGs to account for the difference 
in resource use by patients exhibiting the case complexity and multiple 
medical problems characteristic of LTCHs. Below we provide a general 
summary of our existing methodology for determining the proposed FY 
2016 MS-LTC-DRG relative weights under the LTCH PPS.
    In this proposed rule, in general, for FY 2016, we are proposing to 
use the same methodology and steps to determine the MS-LTC-DRG relative 
weights (as discussed in greater detail in section VII.C.3. of the 
preamble of this proposed rule). However, under the dual-rate LTCH PPS 
payment structure required by statute, we are proposing that, beginning 
with FY 2016, the annual recalibration of the MS-LTC-DRG relative 
weights would be determined (1) using only data from available LTCH PPS 
claims that would have qualified for payment under the new LTCH PPS 
standard Federal payment rate if that rate were in effect when claims 
data from time periods before the new statutory dual-rate LTCH PPS 
payment structure applies were

[[Page 24542]]

used to calculate the relative weights, and (2) using only data from 
available LTCH PPS claims that qualify for payment under the new LTCH 
PPS standard Federal payment rate when claims data from time periods 
after the dual rate LTCH PPS payment structure applies are used to 
calculate the relative weights. For the remainder of this discussion, 
we use the phrase ``applicable LTCH cases'' or ``applicable LTCH data'' 
when referring to the resulting claims data set used to calculate the 
relative weights (as described in greater detail in section VII.C.3.c. 
of the preamble of this proposed rule). In addition, we are proposing 
to continue to exclude the data from all-inclusive rate providers and 
LTCHs paid in accordance with demonstration projects, as well as any 
Medicare Advantage claims from the MS-LTC-DRG relative weight 
calculations for the reasons discussed in section VII.C.3.c. of the 
preamble of this proposed rule.
    Under our proposal, the MS-LTC-DRG relative weights would not be 
used to determine the LTCH PPS payment for cases paid at the site 
neutral payment rate and data from cases paid at the site neutral 
payment rate or that would have been paid at the site neutral payment 
if the dual rate LTCH PPS payment structure had been in effect would 
not be used to develop the relative weights. (For details on our 
proposed application of the site neutral payment rate, we refer readers 
to section VII.B. of the preamble of this proposed rule. For additional 
information on our proposal to use data from applicable LTCH cases to 
determine the MS-LTC-DRG relative weights under the statutory dual-rate 
LTCH PPS payment structure, we refer readers to section VII.B.7.a. of 
the preamble of this proposed rule.)
    Furthermore, for FY 2016, in using data from applicable LTCH cases 
to establish MS-LTC-DRG relative weights, we are proposing to continue 
to establish low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs with less 
than 25 cases) using our quintile methodology in determining the MS-
LTC-DRG relative weights because LTCHs do not typically treat the full 
range of diagnoses as do acute care hospitals. Therefore, for purposes 
of determining the relative weights for the large number of low-volume 
MS-LTC-DRGs, we group all of the low-volume MS-LTC-DRGs into five 
quintiles based on average charges per discharge. Then, under our 
existing methodology, we account for adjustments made to LTCH PPS 
standard Federal payment rate payments for short-stay outlier (SSO) 
cases (that is, cases where the covered length of stay at the LTCH is 
less than or equal to five-sixths of the geometric average length of 
stay for the MS-LTC-DRG), and we make adjustments to account for 
nonmonotonically increasing weights, when necessary. The methodology is 
premised on more severe cases under the MS-LTC-DRG system requiring 
greater expenditure of medical care resources and higher average 
charges such that, in the severity levels within a base MS-LTC-DRG, the 
relative weights should increase monotonically with severity from the 
lowest to highest severity level. (We discuss each of these components 
of our MS-LTC-DRG relative weight methodology in greater detail in 
section VII.C.3.g. of the preamble of this proposed rule.)
2. Patient Classifications Into MS-LTC-DRGs
a. Background
    The MS-DRGs (used under the IPPS) and the MS-LTC-DRGs (used under 
the LTCH PPS) are based on the CMS DRG structure. As noted above in 
this section, we refer to the DRGs under the LTCH PPS as MS-LTC-DRGs 
although they are structurally identical to the MS-DRGs used under the 
IPPS.
    The MS-DRGs are organized into 25 major diagnostic categories 
(MDCs), most of which are based on a particular organ system of the 
body; the remainder involve multiple organ systems (such as MDC 22, 
Burns). Within most MDCs, cases are then divided into surgical DRGs and 
medical DRGs. Surgical DRGs are assigned based on a surgical hierarchy 
that orders operating room (O.R.) procedures or groups of O.R. 
procedures by resource intensity. The GROUPER software program does not 
recognize all ICD-9-CM procedure codes as procedures affecting DRG 
assignment. That is, procedures that are not surgical (for example, 
EKGs), or minor surgical procedures (for example, a biopsy of skin and 
subcutaneous tissue (procedure code 86.11)) do not affect the MS-LTC-
DRG assignment based on their presence on the claim.
    Generally, under the LTCH PPS, a Medicare payment is made at a 
predetermined specific rate for each discharge and that payment varies 
by the MS-LTC-DRG to which a beneficiary's stay is assigned. Cases are 
classified into MS-LTC-DRGs for payment based on the following six data 
elements:
     Principal diagnosis;
     Additional or secondary diagnoses;
     Surgical procedures;
     Age;
     Sex; and
     Discharge status of the patient.
    Currently, for claims submitted on the 5010 format, up to 25 
diagnosis codes and 25 procedure codes are considered for an MS-DRG 
assignment. This includes one principal diagnosis and up to 24 
secondary diagnoses for severity of illness determinations. (For 
additional information on the processing of up to 25 diagnosis codes 
and 25 procedure codes on hospital inpatient claims, we refer readers 
to section II.G.11.c. of the preamble of the FY 2011 IPPS/LTCH PPS 
final rule (75 FR 50127).)
    Under HIPAA transactions and code sets regulations at 45 CFR parts 
160 and 162, covered entities must comply with the adopted transaction 
standards and operating rules specified in Subparts I through S of part 
162. Among other requirements, by January 1, 2012, covered entities 
were required to use the ASC X12 Standards for Electronic Data 
Interchange Technical Report Type 3--Health Care Claim: Institutional 
(837), May 2006, ASC X12N/005010X223, and Type 1 Errata to Health Care 
Claim: Institutional (837) ASC X12 Standards for Electronic Data 
Interchange Technical Report Type 3, October 2007, ASC X12N/
005010X233A1 for the health care claims or equivalent encounter 
information transaction (45 CFR 162.1102).
    HIPAA requires covered entities to use the applicable medical data 
code set requirements when conducting HIPAA transactions (45 CFR 
162.1000). Currently, upon the discharge of the patient, the LTCH must 
assign appropriate diagnosis and procedure codes from the most current 
version of the Internal Classification of Diseases, Ninth Revision, 
Clinical Modification (ICD-9-CM). For additional information on the 
ICD-9-CM coding system, we refer readers to the FY 2008 IPPS final rule 
with comment period (72 FR 47241 through 47243 and 47277 through 
47281). We also refer readers to the detailed discussion on correct 
coding practices in the August 30, 2002 LTCH PPS final rule (67 FR 
55981 through 55983). Additional coding instructions and examples are 
published in the Coding Clinic for ICD-9-CM, a product of the American 
Hospital Association. (We refer readers to section II.G.13. of the 
preamble of this proposed rule for additional information on the annual 
revisions to the ICD-9-CM codes.)
    Currently, providers use the code sets under the ICD-9-CM coding 
system to report diagnoses and procedures for Medicare hospital 
inpatient services under the MS-DRG system. We have been discussing the 
conversion to the ICD-10 coding system for many years. Hospitals, 
including LTCHs, are

[[Page 24543]]

required to use the ICD-10 coding system effective October 1, 2015. 
Consequently, providers will begin using the code sets under the ICD-10 
coding system to report diagnoses (ICD-10-CM codes) and procedures 
(ICD-10-PCS codes) for Medicare hospital inpatient services under the 
MS-DRG system (and by extension the MS-LTC-DRG system) beginning 
October 1, 2015. For additional information on the implementation of 
the ICD-10 coding system, we refer readers to section II.G.1. of the 
preamble of this proposed rule.
    To create the MS-DRGs (and by extension, the MS-LTC-DRGs), base 
DRGs were subdivided according to the presence of specific secondary 
diagnoses designated as complications or comorbidities (CCs) into one, 
two, or three levels of severity, depending on the impact of the CCs on 
resources used for those cases. Specifically, there are sets of MS-DRGs 
that are split into 2 or 3 subgroups based on the presence or absence 
of a CC or a major complication or comorbidity (MCC). We refer readers 
to section II.D. of the FY 2008 IPPS final rule with comment period for 
a detailed discussion about the creation of MS-DRGs based on severity 
of illness levels (72 FR 47141 through 47175).
    MACs enter the clinical and demographic information submitted by 
LTCHs into their claims processing systems and subject this information 
to a series of automated screening processes called the Medicare Code 
Editor (MCE). These screens are designed to identify cases that require 
further review before assignment into a MS-LTC-DRG can be made. During 
this process, certain cases are selected for further development (74 FR 
43949).
    After screening through the MCE, each claim is classified into the 
appropriate MS-LTC-DRG by the Medicare LTCH GROUPER software on the 
basis of diagnosis and procedure codes and other demographic 
information (age, sex, and discharge status). The GROUPER software used 
under the LTCH PPS is the same GROUPER software program used under the 
IPPS. Following the MS-LTC-DRG assignment, the Medicare contractor 
determines the prospective payment amount by using the Medicare PRICER 
program, which accounts for hospital-specific adjustments. Under the 
LTCH PPS, we provide an opportunity for LTCHs to review the MS-LTC-DRG 
assignments made by the Medicare contractor and to submit additional 
information within a specified timeframe as provided in Sec.  
412.513(c).
    The GROUPER software is used both to classify past cases to measure 
relative hospital resource consumption to establish the MS-LTC-DRG 
relative weights and to classify current cases for purposes of 
determining payment. The records for all Medicare hospital inpatient 
discharges are maintained in the MedPAR file. The data in this file are 
used to evaluate possible MS-DRG and MS-LTC-DRG classification changes 
and to recalibrate the MS-DRG and MS-LTC-DRG relative weights during 
our annual update under both the IPPS (Sec.  412.60(e)) and the LTCH 
PPS (Sec.  412.517), respectively.
b. Proposed Changes to the MS-LTC-DRGs for FY 2016
    As specified by our regulations at Sec.  412.517(a), which require 
that the MS-LTC-DRG classifications and relative weights be updated 
annually, and consistent with our historical practice of using the same 
patient classification system under the LTCH PPS as is used under the 
IPPS, we are proposing to update the MS-LTC-DRG classifications 
effective October 1, 2015, through September 30, 2016 (FY 2016) 
consistent with the proposed changes to specific MS-DRG classifications 
presented in section II.G. of the preamble of this proposed rule. 
Therefore, the proposed MS-LTC-DRGs for FY 2016 presented in this 
proposed rule are the same as the proposed MS-DRGs that are being 
proposed for use under the IPPS for FY 2016. Specifically, as discussed 
in section II.G.1.b. of this preamble of this proposed rule, we are 
proposing to use the ICD-10 MS-DRGs Version 33 as the replacement logic 
for the ICD-9-CM based MS-DRGs Version 32 as part of the proposed MS-
DRG updates (and by extension the MS-LTC-DRG) updates for FY 2016. The 
proposed GROUPER Version 33 is based on ICD-10-CM/PCS diagnoses and 
procedure codes, consistent with the requirement to use ICD-10 
beginning October 1, 2015, as noted above and discussed in greater 
detail section II.G.1. of the preamble of this proposed rule. We are 
inviting public comments on how well the ICD-10 MS-DRGs Version 33 (and 
by extension the ICD-10 MS-LTC-DRGs Version 33) replicates the logic of 
the ICD-9 MS-DRGs Version 32 (and by extension ICD-9 MS-LTC-DRGs 
Version 32). (We note that, when referencing MS-LTC-DRGs Version 33 in 
the remainder of this section, we are referring to the ICD-10-based MS-
LTC-DRGs Version 33 unless otherwise stated. Similarly, when 
referencing MS-LTC-DRGs Version 32 for the remainder of this section, 
we are referring to the ICD-9-based MS-LTC-DRGs Version 32 unless 
otherwise stated.) In addition, because the proposed MS-LTC-DRGs for FY 
2016 are the same as the proposed MS-DRGs for FY 2016, the other 
proposed changes that affect MS-DRG (and by extension MS-LTC-DRG) 
assignments under proposed GROUPER Version 33, as discussed in section 
II.G. of the preamble of this proposed rule, including the proposed 
changes to the MCE software and the ICD-10 coding system, would also be 
applicable under the LTCH PPS for FY 2016.
3. Development of the Proposed FY 2016 MS-LTC-DRG Relative Weights
a. General Overview of the Development of the MS-LTC-DRG Relative 
Weights
    One of the primary goals for the implementation of the LTCH PPS is 
to pay each LTCH an appropriate amount for the efficient delivery of 
medical care to Medicare patients. The system must be able to account 
adequately for each LTCH's case-mix in order to ensure both fair 
distribution of Medicare payments and access to adequate care for those 
Medicare patients whose care is more costly (67 FR 55984). To 
accomplish these goals, we have annually adjusted the LTCH PPS standard 
Federal prospective payment system rate by the applicable relative 
weight in determining payment to LTCHs for each case. In order to make 
these annual adjustments under the new dual-rate LTCH PPS payment 
structure required by the statute, as previously discussed in section 
VII.B.7.a. of the preamble of this proposed rule, we are proposing, 
beginning with FY 2016, to recalibrate the MS-LTC-DRG relative 
weighting factors annually using data from applicable LTCH cases. Under 
this proposal, the resulting MS-LTC-DRG relative weights would continue 
to be used to adjust the LTCH PPS standard Federal rate when 
calculating the payment for standard payment rate cases. However, the 
MS-LTC-DRG relative weights would not be used to determine the LTCH PPS 
payment for cases paid under the site neutral payment rate. (For 
details on our proposed application of the site neutral payment rate, 
we refer readers to section VII.B. of the preamble of this proposed 
rule.)
    The basic methodology used to develop the MS-LTC-DRG relative 
weights is generally consistent with the general methodology 
established when the LTCH PPS was implemented in the August 30, 2002 
LTCH PPS final rule (67 FR 55989 through 55991), with the exception of 
some modifications of our historical procedures for assigning relative 
weights in cases of zero volume and/or nonmonotonicity resulting from

[[Page 24544]]

the adoption of the MS-LTC-DRGs. (For details on the modifications to 
our historical procedures for assigning relative weights in cases of 
zero volume and/or nonmonotonicity, we refer readers to the FY 2008 
IPPS final rule with comment period (72 FR 47289 through 47295) and the 
FY 2009 IPPS final rule (73 FR 48542 through 48550).) Under the LTCH 
PPS, relative weights for each MS-LTC-DRG are a primary element used to 
account for the variations in cost per discharge and resource 
utilization among the payment groups (Sec.  412.515). To ensure that 
Medicare patients classified to each MS-LTC-DRG have access to an 
appropriate level of services and to encourage efficiency, we calculate 
a relative weight for each MS-LTC-DRG that represents the resources 
needed by an average inpatient LTCH case in that MS-LTC-DRG. For 
example, cases in a MS-LTC-DRG with a relative weight of 2 will, on 
average, cost twice as much to treat as cases in a MS-LTC-DRG with a 
relative weight of 1.
b. Development of the Proposed MS-LTC-DRG Relative Weights for FY 2016
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50170 through 
50176), we presented our policies for the development of the MS-LTC-DRG 
relative weights for FY 2015. The basic methodology we used to develop 
the FY 2015 MS-LTC-DRG relative weights was the same as the methodology 
we used to develop the FY 2014 MS-LTC-DRG relative weights in the FY 
2014 IPPS/LTCH PPS final rule and was consistent with the general 
methodology established when the LTCH PPS was implemented in the August 
30, 2002 LTCH PPS final rule (67 FR 55989 through 55991).
    In this proposed rule, we are proposing to continue to use the same 
general methodology to determine the proposed MS-LTC-DRG relative 
weights for FY 2016, including the proposed application of established 
policies related to, the hospital-specific relative value methodology, 
the treatment of severity levels in the proposed MS-LTC-DRGs, proposed 
low-volume and no-volume MS-LTC-DRGs, proposed adjustments for 
nonmonotonicity, and the steps for calculating the proposed MS-LTC-DRG 
relative weights with a proposed budget neutrality factor. However, as 
previously noted and discussed in greater detail in section VII.B.7.a. 
of the preamble of this proposed rule, under the dual-rate LTCH PPS 
payment structure required by statute, we are proposing that the FY 
2016 MS-LTC DRG relative weights would be determined based only on data 
from applicable LTCH cases. We discuss the effects of our proposal 
concerning the data used to determine the FY 2016 MS-LTC-DRG relative 
weights on the various components of our existing methodology in the 
discussion that follows.
    Furthermore, as we have done since the FY 2008 update, we are 
proposing to apply a two-step budget neutrality adjustment to the 
annual update to the MS-LTC-DRG classifications and relative weights at 
Sec.  412.517(b) (in conjunction with Sec.  412.503), such that 
estimated aggregate LTCH PPS payments would be unaffected, that is, 
would be neither greater than nor less than the estimated aggregate 
LTCH PPS payments that would have been made without the classification 
and relative weight changes (72 FR 26882 through 26884). For additional 
information on the established two-step budget neutrality methodology, 
we refer readers to the FY 2008 IPPS final rule (72 FR 47295 through 
47296). Below we present our proposed methodology for determining the 
proposed MS-LTC-DRG relative weights for FY 2016 LTCH PPS standard 
Federal payment rate payments, which is generally consistent with the 
methodology presented in the FY 2015 IPPS/LTCH PPS final rule, except 
for the proposed use of applicable LTCH data.
c. Applicable LTCH Data
    For this FY 2016 proposed rule, to calculate the proposed MS-LTC-
DRG relative weights for FY 2016 LTCH PPS standard Federal payment rate 
payments, we obtained total charges from FY 2014 Medicare LTCH claims 
data from the December 2014 update of the FY 2014 MedPAR file, which 
are the best available data at this time, and the proposed Version 33 
of the GROUPER to classify LTCH cases. Consistent with our historical 
practice, we are proposing that if more recent data become available, 
we would use those data and the finalized Version 33 of the GROUPER in 
establishing the FY 2016 MS-LTC-DRG relative weights in the final rule. 
To calculate the proposed FY 2016 MS-LTC-DRG relative weights under the 
new statutory dual-rate LTCH PPS payment structure that will be 
effective beginning October 1, 2015, as previously discussed in section 
VII.B.7.a. of the preamble of this proposed rule, beginning with the 
annual recalibration of the MS-LTC-DRG relative weights for FY 2016, we 
are proposing to use applicable LTCH data. Accordingly, we began by 
first evaluating the LTCH claims data in the December 2014 update of 
the FY 2014 MedPAR file to determine which LTCH cases would have met 
the criteria for exclusion from the site neutral payment rate under 
proposed Sec.  412.522(b) (as discussed in greater detail in section 
VII.B.3. of the preamble of this proposed rule) had the new dual-rate 
LTCH PPS payment structure been in effect at the time those claims were 
processed. We identified the FY 2014 LTCH cases that were not assigned 
to MS-LTC-DRGs 876, 880, 881, 882, 883, 884, 885, 886, 887, 894, 895, 
896, 897, 945 and 946, which, under our proposals, would identify LTCH 
cases that do not have a principal diagnosis relating to a psychiatric 
diagnosis or to rehabilitation (as discussed in section VII.B.3.b. of 
the preamble of this proposed rule); and that either--
     The admission to the LTCH was ``immediately preceded'' by 
discharge from a subsection (d) hospital and the immediately preceding 
stay in that subsection (d) hospital included at least 3 days in an 
ICU, as we define under the proposed ICU criterion (discussed in 
section VII.B.3.e. of the preamble of this proposed rule); or
     The admission to the LTCH was ``immediately preceded'' by 
discharge from a subsection (d) hospital and the claim for the LTCH 
discharge includes the applicable procedure code that indicates at 
least 96 hours of ventilator services were provided during the LTCH 
stay, as we define under the proposed ventilator criterion (discussed 
in section VII.B.3.f. of the preamble of this proposed rule). Claims 
data from December 2014 update of the FY 2014 MedPAR file that reported 
ICD-9-CM procedure code 96.72 were used to identify cases involving at 
least 96 hours of ventilator services in accordance with the proposed 
ventilator criterion. (We note that the corresponding ICD-10-PCS code 
for cases involving at least 94 hours of ventilation services is 
5A1955Z, effective as of October 1, 2015.)
    Then, consistent with our historical methodology, we excluded any 
claims in the resulting data set that were submitted by LTCHs that are 
all-inclusive rate providers and LTCHs that are reimbursed in 
accordance with demonstration projects authorized under section 402(a) 
of Public Law 90-248 or section 222(a) of Public Law 92-603. In 
addition, consistent with our historical practice, we excluded the 
Medicare Advantage (Part C) claims that were in the resulting data set 
based on the presence of a GHO Paid indicator value of ``1'' in the 
MedPAR files. The claims that remained after these three trims (that 
is, the applicable LTCH data) were then used to calculate the

[[Page 24545]]

proposed relative weights for the LTCH PPS standard Federal payment 
rate payments for FY 2016.
    In summary, in identifying the claims data for the development of 
the proposed FY 2016 MS-LTC-DRG relative weights in this proposed rule, 
we are proposing to use claims data after we trim the claims data of 10 
all-inclusive rate providers and the 1 LTCH that is paid in accordance 
with a demonstration project reported in the December 2014 update of 
the FY 2014 MedPAR file, as well as any Medicare Advantage claims data 
for cases that would have met the criteria for exclusion from the site 
neutral payment rate under proposed Sec.  412.522(b) if the new dual-
rate LTCH PPS payment structure were in effect at the time those claims 
were processed. We are proposing to use the remaining data (that is, 
the applicable LTCH data) to calculate the proposed relative weights 
for the LTCH PPS standard Federal payment rate payments for FY 2016.
d. Hospital-Specific Relative Value (HSRV) Methodology
    By nature, LTCHs often specialize in certain areas, such as 
ventilator-dependent patients. Some case types (MS-LTC-DRGs) may be 
treated, to a large extent, in hospitals that have, from a perspective 
of charges, relatively high (or low) charges. This nonrandom 
distribution of cases with relatively high (or low) charges in specific 
MS-LTC-DRGs has the potential to inappropriately distort the measure of 
average charges. To account for the fact that cases may not be randomly 
distributed across LTCHs, consistent with the methodology we have used 
since the implementation of the LTCH PPS, we are proposing to continue 
to use a hospital-specific relative value (HSRV) methodology to 
calculate the proposed MS-LTC-DRG relative weights for FY 2016 LTCH PPS 
standard Federal payment rate payments. We believe this method removes 
this hospital-specific source of bias in measuring LTCH average charges 
(67 FR 55985). Specifically, under this methodology, we are proposing 
to reduce the impact of the variation in charges across providers on 
any particular MS-LTC-DRG relative weight by converting each LTCH's 
charge for an applicable LTCH case to a relative value based on that 
LTCH's average charge for such cases.
    Under the HSRV methodology, we standardize charges for each LTCH by 
converting its charges for each applicable LTCH case to hospital-
specific relative charge values and then adjusting those values for the 
LTCH's case-mix. The adjustment for case-mix is needed to rescale the 
hospital-specific relative charge values (which, by definition, average 
1.0 for each LTCH). The average relative weight for a LTCH is its case-
mix; therefore, it is reasonable to scale each LTCH's average relative 
charge value by its case-mix. In this way, each LTCH's relative charge 
value is adjusted by its case-mix to an average that reflects the 
complexity of the applicable LTCH cases it treats relative to the 
complexity of the applicable LTCH cases treated by all other LTCHs (the 
average LTCH PPS case-mix of all applicable LTCH cases across all 
LTCHs).
    In accordance with our established methodology, we standardize 
charges for each applicable LTCH case by first dividing the adjusted 
charge for the case (adjusted for SSOs under Sec.  412.529 as described 
in section VII.C.3.g. (Step 3) of the preamble of this proposed rule) 
by the average adjusted charge for all applicable LTCH cases at the 
LTCH in which the case was treated. SSO cases are cases with a length 
of stay that is less than or equal to five-sixths the average length of 
stay of the MS-LTC-DRG (Sec.  412.529 and Sec.  412.503). The average 
adjusted charge reflects the average intensity of the health care 
services delivered by a particular LTCH and the average cost level of 
that LTCH. The resulting ratio is multiplied by that LTCH's case-mix 
index to determine the standardized charge for the case (67 FR 55989).
    Multiplying the resulting ratio by the LTCH's case-mix index 
accounts for the fact that the same relative charges are given greater 
weight at a LTCH with higher average costs than they would at a LTCH 
with low average costs, which is needed to adjust each LTCH's relative 
charge value to reflect its case-mix relative to the average case-mix 
for all LTCHs. Because we standardize charges in this manner, we count 
charges for a Medicare patient at a LTCH with high average charges as 
less resource intensive than they would be at a LTCH with low average 
charges. For example, a $10,000 charge for a case at a LTCH with an 
average adjusted charge of $17,500 reflects a higher level of relative 
resource use than a $10,000 charge for a case at a LTCH with the same 
case-mix, but an average adjusted charge of $35,000. We believe that 
the adjusted charge of an individual case more accurately reflects 
actual resource use for an individual LTCH because the variation in 
charges due to systematic differences in the markup of charges among 
LTCHs is taken into account.
e. Treatment of Severity Levels in Developing the Proposed MS-LTC-DRG 
Relative Weights
    For purposes of determining the MS-LTC-DRG relative weights, under 
our historical methodology, there are three different categories of MS-
DRGs based on volume of cases within specific MS-LTC-DRGs: (1) MS-LTC-
DRGs with at least 25 applicable LTCH cases in the data used to 
calculate the relative weight, which are each assigned a unique 
relative weight; (2) low-volume MS-LTC-DRGs (that is, MS-LTC-DRGs that 
contain between 1 and 24 applicable LTCH cases that are grouped into 
quintiles (as described below) and assigned the relative weight of the 
quintile; and (3) no-volume MS-LTC-DRGs that are cross-walked to other 
MS-LTC-DRGs based on the clinical similarities and assigned the 
relative weight of the cross-walked MS-LTC-DRG (as described in greater 
detail below). We are proposing to use applicable LTCH cases to 
establish the same volume-based categories to calculate the FY 2016 
relative weights for LLTCH PPS standard Federal payment rate payments. 
This approach is consistent with our policies regarding the continued 
use of our existing methodology related to the treatment of severity 
levels as presented in the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50172).
    We provide in-depth discussions of our proposed policy regarding 
weight-setting for proposed low-volume MS-LTC-DRGs in section 
VII.C.3.f. of the preamble of this proposed rule and for proposed no-
volume MS-LTC-DRGs, under proposed Step 5 in section VII.C.3.g. of the 
preamble of this proposed rule.) Furthermore, in determining the 
proposed FY 2016 MS-LTC-DRG relative weights for LTCH PPS standard 
Federal payment rate payments, when necessary, we are proposing to make 
adjustments to account for nonmonotonicity, as discussed in greater 
detail below in proposed Step 6 of section VII.C.3.g. of the preamble 
of this proposed rule. We refer readers to the discussion in the FY 
2010 IPPS/RY 2010 LTCH PPS final rule for our rationale for including 
an adjustment for nonmonotonicity (74 FR 43953 through 43954).
f. Proposed Low-Volume MS-LTC-DRGs
    In order to account for proposed MS-LTC-DRGs for LTCH PPS Standard 
Federal payment rate cases with low-volume (that is, with fewer than 25 
applicable LTCH cases), consistent with our existing methodology for 
purposes

[[Page 24546]]

of determining the FY 2015 MS-LTC-DRG relative weights, we are 
proposing to employ the quintile methodology for proposed low-volume 
MS-LTC-DRGs, such that we group the proposed ``low-volume MS-LTC-DRGs'' 
(that is, proposed MS-LTC-DRGs that contain between 1 and 24 applicable 
LTCH cases into one of five categories (quintiles) based on average 
charges (67 FR 55984 through 55995 and 72 FR 47283 through 47288). In 
cases where the initial assignment of a proposed low-volume MS-LTC-DRG 
to a quintile results in nonmonotonicity within a base-DRG, we are 
proposing to make adjustments to the resulting low-volume MS-LTC-DRGs 
to preserve monotonicity, as discussed in detail below in section 
VII.C.3.g. (Step 6) of the preamble of this proposed rule.
    We identified 250 proposed MS-LTC-DRGs that contained between 1 and 
24 applicable LTCH cases. This list of proposed MS-LTC-DRGs was then 
divided into one of the proposed 5 low-volume quintiles, each 
containing 50 MS-LTC-DRGs (250/5 = 50). We assigned the proposed low-
volume MS-LTC-DRGs to specific proposed low-volume quintiles by sorting 
the proposed low-volume MS-LTC-DRGs in ascending order by average 
charge in accordance with our established methodology. Based on the 
data available for this proposed rule, the number of proposed MS-LTC-
DRGs with less than 25 applicable LTCH cases was evenly divisible by 5. 
Therefore, it was not necessary to employ our historical methodology 
for determining which of the low-volume quintiles contain an additional 
low-volume MS-LTC-DRG. If the number of MS-LTC-DRGs with less than 25 
applicable LTCH cases from the most recent data available for the final 
rule does not divide evenly, we are proposing to use our historical 
methodology for determining which quintiles would contain the 
additional MS-LTC-DRGs. For this proposed rule, after organizing the 
MS-LTC-DRGs by ascending order by average charge, we assigned the first 
fifth (1st through 50th) of proposed low-volume MS-LTC-DRGs (with the 
lowest average charge) into proposed Quintile 1. The 50 proposed MS-
LTC-DRGs with the highest average charge cases were assigned into 
proposed Quintile 5. Table 13A, listed in section VI. of the Addendum 
to this proposed rule and available via the Internet, lists the 
proposed composition of the proposed low-volume quintiles for MS-LTC-
DRGs for FY 2016.
    Accordingly, in order to determine the proposed FY 2016 relative 
weights for the proposed MS-LTC-DRGs with low-volume, we are proposing 
to use the five low-volume quintiles described above. We determined a 
proposed relative weight and (geometric) average length of stay for 
each of the five proposed low-volume quintiles using the proposed 
methodology described in section VII.C.3.g. of the preamble of this 
proposed rule. We are proposing to assign the same proposed relative 
weight and average length of stay to each of the proposed low-volume 
MS-LTC-DRGs that make up an individual low-volume quintile. We note 
that, as this system is dynamic, it is possible that the number and 
specific type of MS-LTC-DRGs with a low-volume of applicable LTCH cases 
will vary in the future. Furthermore, we note that we will continue to 
monitor the volume (that is, the number of applicable LTCH cases) in 
the low-volume quintiles to ensure that our quintile assignments used 
in determining the MS-LTC-DRG relative weights for LTCH PPS standard 
Federal payment rate payments result in appropriate payment for LTCH 
cases that would be grouped to proposed low-volume MS-LTC-DRGs and do 
not result in an unintended financial incentive for LTCHs to 
inappropriately admit these types of cases.
g. Steps for Determining the Proposed FY 2016 MS-LTC-DRG Relative 
Weights
    In this proposed rule, we are proposing to use the same steps from 
our existing methodology to determine the proposed FY 2016 MS-LTC-DRG 
relative weights for LTCH PPS standard Federal payment rate payments. 
(For additional information on the original development of the steps in 
this methodology, and modifications to it since the adoption of the MS-
LTC-DRGs, we refer readers to the August 30, 2002 LTCH PPS final rule 
(67 FR 55989 through 55995) and the FY 2010 IPPS/RY 2010 LTCH PPS final 
rule (74 FR 43951 through 43966).) As stated previously in this 
section, this approach is consistent with our policies regarding the 
continued use of our existing methodology, which was used to determine 
the FY 2015 MS-LTC-DRG relative weights as presented in the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50173 through 50176). However, in doing 
so, we are proposing to use only applicable LTCH (as discussed in 
section VII.B.7.a. of the preamble of this proposed rule).
    In summary, to determine the proposed FY 2016 MS-LTC-DRG relative 
weights, we are proposing to group applicable LTCH cases to the 
appropriate proposed MS-LTC-DRG, while taking into account the proposed 
low-volume quintiles (as described above) and cross-walking proposed 
no-volume MS-LTC-DRGs as described below. After establishing the 
appropriate proposed MS-LTC-DRG (or proposed low-volume quintile), we 
are proposing to calculate the FY 2016 relative weights for LTCH PPS 
standard Federal payment rate payments by first removing statistical 
outliers and cases with a length of stay of 7 days or less (Steps 1 and 
2 below). Next, we are proposing to adjust the number of applicable 
LTCH cases in each proposed MS-LTC-DRG (or proposed low-volume 
quintile) for the effect of SSO cases (Step 3 below). After removing 
statistical outliers (Step 1 below) and applicable LTCH cases with a 
length of stay of 7 days or less (Step 2 below), which are the SSO-
adjusted applicable LTCH cases and corresponding charges, we are 
proposing to calculate ``relative adjusted weights'' for each proposed 
MS-LTC-DRG (or proposed low-volume quintile) using the HSRV method. 
Below we discuss in detail the steps for calculating the proposed FY 
2016 MS-LTC-DRG relative weights for LTCH PPS standard Federal payment 
rate payments.
    Step 1--Remove statistical outliers.
    The first step in our proposed calculation of the proposed FY 2016 
MS-LTC-DRG relative weights for LTCH PPS standard Federal payment rate 
payments is to remove statistical outlier cases from applicable LTCH 
cases. Consistent with our historical relative weight methodology, we 
are proposing to continue to define statistical outliers as cases that 
are outside of 3.0 standard deviations from the mean of the log 
distribution of both charges per case and the charges per day for each 
MS-LTC-DRG. These statistical outliers are removed prior to calculating 
the proposed relative weights because we believe that they may 
represent aberrations in the data that distort the measure of average 
resource use. Including those LTCH cases in the calculation of the 
proposed relative weights for LTCH PPS standard Federal payment rate 
payments could result in an inaccurate relative weight that does not 
truly reflect relative resource use among those MS-LTC-DRGs. (For 
additional information on what would be removed in this step of the 
relative weight methodology, we refer readers to 67 FR 55989 and 74 FR 
43959.)
    Step 2--Remove cases with a length of stay of 7 days or less.
    The MS-LTC-DRG relative weights reflect the average of resources 
used on representative cases of a specific type. Generally, cases with 
a length of stay of 7 days or less do not belong in a LTCH

[[Page 24547]]

because these stays do not fully receive or benefit from treatment that 
is typical in a LTCH stay, and full resources are often not used in the 
earlier stages of admission to a LTCH. If we were to include stays of 7 
days or less in the computation of the FY 2016 MS-LTC-DRG relative 
weights, the value of many relative weights would decrease and, 
therefore, payments would decrease to a level that may no longer be 
appropriate. We do not believe that it would be appropriate to 
compromise the integrity of the payment determination for those LTCH 
cases that actually benefit from and receive a full course of treatment 
at a LTCH by including data from these very short stays. Therefore, 
consistent with our historical relative weight methodology, in 
determining the proposed FY 2016 MS-LTC-DRG relative weights for LTCH 
PPS standard Federal payment rate payments, we are further proposing to 
remove LTCH cases with a length of stay of 7 days or less from 
applicable LTCH cases. (For additional information on what would be 
removed in this step of the relative weight methodology, we refer 
readers to 67 FR 55989 and 74 FR 43959.)
    Step 3--Adjust charges for the effects of SSOs.
    After removing statistical outliers and cases with a length of stay 
of 7 days or less, we are left with applicable LTCH cases that have a 
length of stay greater than or equal to 8 days. In this proposed rule, 
we refer to these cases as ``trimmed applicable LTCH cases.'' As the 
next step in the calculation of the proposed FY 2016 MS-LTC-DRG 
relative weights for LTCH PPS standard Federal payment rate payments, 
consistent with our historical approach, we are proposing to adjust 
each LTCH's charges per discharge for those remaining cases for the 
effects of SSOs (as defined in Sec.  412.529(a) in conjunction with 
Sec.  412.503). Specifically, we are proposing to make this adjustment 
by counting an SSO case as a fraction of a discharge based on the ratio 
of the length of stay of the case to the average length of stay for the 
MS-LTC-DRG for non-SSO cases. This has the effect of proportionately 
reducing the impact of the lower charges for the SSO cases in 
calculating the average charge for the MS-LTC-DRG. This process 
produces the same result as if the actual charges per discharge of an 
SSO case were adjusted to what they would have been had the patient's 
length of stay been equal to the average length of stay of the MS-LTC-
DRG.
    Counting SSO cases as full LTCH cases with no adjustment in 
determining the proposed FY 2016 MS-LTC-DRG relative weights for LTCH 
PPS standard Federal payment rate payments would lower the proposed FY 
2016 MS-LTC-DRG relative weight for affected MS-LTC-DRGs because the 
relatively lower charges of the SSO cases would bring down the average 
charge for all cases within a MS-LTC-DRG. This would result in an 
``underpayment'' for non-SSO cases and an ``overpayment'' for SSO 
cases. Therefore, we are proposing to continue to adjust for SSO cases 
under Sec.  412.529 in this manner because it results in more 
appropriate payments for all LTCH PPS standard Federal payment rate 
cases. (For additional information on this step of the relative weight 
methodology, we refer readers to 67 FR 55989 and 74 FR 43959.)
    Step 4--Calculate the proposed FY 2016 MS-LTC-DRG relative weights 
on an iterative basis.
    Consistent with our historical relative weight methodology, we are 
proposing to then calculate the FY 2016 MS-LTC-DRG relative weights for 
LTCH PPS standard Federal payment rate payments using the HSRV 
methodology, which is an iterative process. First, for each case, we 
calculate a hospital-specific relative charge value by dividing the 
charge per discharge after adjusting for SSOs of the LTCH case (from 
Step 3) by the average charge per SSO-adjusted discharge for the LTCH 
in which the case occurred. The resulting ratio is then multiplied by 
the LTCH's case-mix index to produce an adjusted hospital-specific 
relative charge value for the case. An initial case-mix index value of 
1.0 is used for each LTCH.
    For each proposed MS-LTC-DRG, we calculated the proposed FY 2016 
relative weight by dividing the SSO-adjusted average of the hospital-
specific relative charge values for applicable LTCH cases (that is, the 
sum of the hospital-specific relative charge value from above divided 
by the sum of equivalent cases from step 3 for each MS-LTC-DRG) for the 
proposed MS-LTC-DRG by the overall SSO-adjusted average hospital-
specific relative charge value across all applicable LTCH cases for all 
LTCHs (that is, the sum of the hospital-specific relative charge value 
from above divided by the sum of equivalent applicable LTCH cases from 
step 3 for each MS-LTC-DRG). Using these recalculated MS-LTC-DRG 
relative weights, each LTCH's average relative weight for all of its 
applicable LTCH cases (that is, its case-mix) is calculated by dividing 
the sum of all the LTCH's MS-LTC-DRG relative weights by its total 
number of applicable LTCH cases. The LTCHs' hospital-specific relative 
charge values (from above) are then multiplied by the hospital-specific 
case-mix indexes. The hospital-specific case-mix adjusted relative 
charge values are then used to calculate a new set of proposed MS-LTC-
DRG relative weights across all LTCHs. This iterative process is 
continued until there is convergence between the relative weights 
produced at adjacent steps, for example, when the maximum difference 
was less than 0.0001. (We note that, although we are not proposing any 
changes to this step of our relative weight methodology in this 
proposed rule, we have made some minor changes to the description of 
this step to clarify the application of our existing policy.)
    Step 5--Determine a proposed FY 2016 relative weight for MS-LTC-
DRGs with no applicable LTCH cases.
    Using the trimmed applicable LTCH cases, we identified the proposed 
MS-LTC-DRGs for which there were no claims in the December 2014 update 
of the FY 2014 MedPAR file and, therefore, for which no charge data was 
available for these proposed MS-LTC-DRGs. Because patients with a 
number of the diagnoses under these proposed MS-LTC-DRGs may be treated 
at LTCHs, consistent with our historical methodology, we are generally 
proposing to assign a proposed relative weight to each of the proposed 
no-volume MS-LTC-DRGs for LTCH PPS standard Federal payment rate cases 
based on clinical similarity and relative costliness (with the 
exception of ``transplant'' proposed MS-LTC-DRGs, ``error'' proposed 
MS-LTC-DRGs, and proposed MS-LTC-DRGs that indicate a principal 
diagnosis related to a psychiatric diagnosis or rehabilitation 
(referred to as the ``psychiatric or rehabilitation'' MS-LTC-DRGs), as 
discussed below). (For additional information on this step of the 
relative weight methodology, we refer readers to 67 FR 55991 and 74 FR 
43959 through 43960.)
    We are proposing to cross-walk each proposed no-volume MS-LTC-DRG 
to another proposed MS-LTC-DRG for which we calculated a proposed 
relative weight (determined in accordance with the methodology 
described above). Then, the ``no-volume'' proposed MS-LTC-DRG would be 
assigned the same proposed relative weight (and average length of stay) 
of the proposed MS-LTC-DRG to which it was cross-walked (as described 
in greater detail below).
    Of the 758 proposed MS-LTC-DRGs for FY 2016, we identified 368 MS-
LTC-DRGs for which there are no trimmed applicable LTCH cases (the 
number identified includes no trimmed applicable LTCH cases in the 8 
``transplant'' MS-LTC-DRGs, the 2 ``error'' MS-LTC-DRGs, and the 15

[[Page 24548]]

``psychiatric or rehabilitation'' MS-LTC-DRGs, which are discussed 
below). We are proposing to assign proposed relative weights to each of 
the 343 no-volume proposed MS-LTC-DRGs that contained trimmed 
applicable LTCH cases based on clinical similarity and relative 
costliness to one of the remaining 390 (758 - 368 = 390) proposed MS-
LTC-DRGs for which we are able to propose relative weights based on the 
trimmed applicable LTCH cases in the FY 2014 MedPAR file data using the 
steps described above. (For the remainder of this discussion, we refer 
to the ``cross-walked''proposed MS-LTC-DRGs as the proposed MS-LTC-DRGs 
to which we cross-walked one of the 343 ``no volume'' proposed MS-LTC-
DRGs.) Then, we are generally proposing to assign the 343 no-volume 
proposed MS-LTC-DRG the proposed relative weight of the proposed cross-
walked MS-LTC-DRG. (As explained below in Step 6, when necessary, we 
make adjustments to account for nonmonotonicity.)
    We are proposing to cross-walk the no-volume proposed MS-LTC-DRG to 
a proposed MS-LTC-DRG for which we are able to propose relative weights 
based on the December 2014 update of the FY 2014 MedPAR file, and to 
which it is similar clinically in intensity of use of resources and 
relative costliness as determined by criteria such as care provided 
during the period of time surrounding surgery, surgical approach (if 
applicable), length of time of surgical procedure, postoperative care, 
and length of stay. (For more details on our process for evaluating 
relative costliness, we refer readers to the FY 2010 IPPS/RY 2010 LTCH 
PPS final rule (73 FR 48543).) We believe in the rare event that there 
would be a few LTCH cases grouped to one of the no-volume MS-LTC-DRGs 
in FY 2015, the relative weights assigned based on the cross-walked MS-
LTC-DRGs would result in an appropriate LTCH PPS payment because the 
crosswalks, which are based on clinical similarity and relative 
costliness, would be expected to generally require equivalent relative 
resource use.
    We then assigned the proposed relative weight of the cross-walked 
proposed MS-LTC-DRG as the proposed relative weight for the no-volume 
proposed MS-LTC-DRG such that both of these proposed MS-LTC-DRGs (that 
is, the no-volume proposed MS-LTC-DRG and the proposed cross-walked MS-
LTC-DRG) have the same proposed relative weight (and average length of 
stay) for FY 2016. We note that, if the proposed cross-walked MS-LTC-
DRG had 25 applicable LTCH cases or more, its proposed relative weight 
(calculated using the methodology described in Steps 1 through 4 above) 
is assigned to the no-volume proposed MS-LTC-DRG as well. Similarly, if 
the proposed MS-LTC-DRG to which the no-volume proposed MS-LTC-DRG was 
cross-walked had 24 or less cases and, therefore, is designated to one 
of the proposed low-volume quintiles for purposes of determining the 
proposed relative weights, we assigned the proposed relative weight of 
the applicable proposed low-volume quintile to the no-volume proposed 
MS-LTC-DRG such that both of these proposed MS-LTC-DRGs (that is, the 
no-volume proposed MS-LTC-DRG and the proposed cross-walked MS-LTC-DRG) 
have the same proposed relative weight for FY 2016. (As we noted above, 
in the infrequent case where nonmonotonicity involving a no-volume 
proposed MS-LTC-DRG resulted, additional adjustments as described in 
Step 6 were required in order to maintain monotonically increasing 
proposed relative weights.)
    For this proposed rule, a list of the no-volume proposed MS-LTC-
DRGs and the proposed MS-LTC-DRGs to which each was cross-walked (that 
is, the proposed cross-walked MS-LTC-DRGs) for FY 2016 is shown in 
Table 13B, which is listed in section VI. of the Addendum to this 
proposed rule and is available via the Internet.
    To illustrate this methodology for determining the proposed 
relative weights for the proposed FY 2016 MS-LTC-DRGs with no 
applicable LTCH cases, we are providing the following example, which 
refers to the no-volume proposed MS-LTC-DRGs crosswalk information for 
FY 2016 provided in Table 13B.
    Example: There were no trimmed applicable LTCH cases in the FY 2014 
MedPAR file that we are proposing to use for this proposed rule for 
proposed MS-LTC-DRG 61 (Acute Ischemic Stroke with Use of Thrombolytic 
Agent with MCC). We determined that proposed MS-LTC-DRG 70 (Nonspecific 
Cerebrovascular Disorders with MCC) is similar clinically and based on 
resource use to proposed MS-LTC-DRG 61. Therefore, we assigned the same 
proposed relative weight (and average length of stay) of proposed MS-
LTC-DRG 70 of 0.9045 for FY 2016 to proposed MS-LTC-DRG 61 (we refer 
readers to Table 11, which is listed in section VI. of the Addendum to 
this proposed rule and is available via the Internet).
    Again, we note that, as this system is dynamic, it is entirely 
possible that the number of MS-LTC-DRGs with no volume will vary in the 
future. We are proposing to use the most recent available claims data 
to identify the trimmed applicable LTCH cases from which we will 
determine the proposed relative weights in this proposed rule.
    For FY 2016, consistent with our historical relative weight 
methodology, we are proposing to establish a relative weight of 0.0000 
for the following transplant MS-LTC-DRGs: Heart Transplant or Implant 
of Heart Assist System with MCC (MS-LTC-DRG 1); Heart Transplant or 
Implant of Heart Assist System without MCC (MS-LTC-DRG 2); Liver 
Transplant with MCC or Intestinal Transplant (MS-LTC-DRG 5); Liver 
Transplant without MCC (MS-LTC-DRG 6); Lung Transplant (MS-LTC-DRG 7); 
Simultaneous Pancreas/Kidney Transplant (MS-LTC-DRG 8); Pancreas 
Transplant (MS-LTC-DRG 10); and Kidney Transplant (MS-LTC-DRG 652). 
This is because Medicare will only cover these procedures if they are 
performed at a hospital that has been certified for the specific 
procedures by Medicare and presently no LTCH has been so certified. At 
the present time, we include these eight transplant MS-LTC-DRGs in the 
GROUPER program for administrative purposes only. Because we use the 
same GROUPER program for LTCHs as is used under the IPPS, removing 
these MS-LTC-DRGs would be administratively burdensome. (For additional 
information regarding our treatment of transplant MS-LTC-DRGs, we refer 
readers to the RY 2010 LTCH PPS final rule (74 FR 43964).) In addition, 
consistent with our historical policy, we are proposing to establish a 
relative weight of 0.0000 for the 2 ``error'' MS-LTC-DRGs (that is, MS-
LTC-DRG 998 (Principal Diagnosis Invalid as Discharge Diagnosis) and 
MS-LTC-DRG 999 (Ungroupable)) because applicable LTCH cases grouped to 
these MS-LTC-DRGs cannot be properly assigned to an MS-LTC-DRG 
according to the grouping logic.
    Furthermore, for FY 2016, we are proposing to establish a proposed 
relative weight equal to the respective FY 2015 relative weight of the 
MS-LTC-DRGs for the following ``psychiatric or rehabilitation'' 
proposed MS-LTC-DRGs: MS-LTC-DRG 876 (O.R. Procedure with Principal 
Diagnoses of Mental Illness); MS-LTC-DRG 880 (Acute Adjustment Reaction 
& Psychosocial Dysfunction); MS-LTC-DRG 881 (Depressive Neuroses); MS-
LTC-DRG 882 (Neuroses Except Depressive); MS-LTC-DRG 883 (Disorders of 
Personality & Impulse Control); MS-LTC-DRG 884 (Organic Disturbances & 
Mental Retardation); MS-LTC-DRG 885 (Psychoses); MS-

[[Page 24549]]

LTC-DRG 886 (Behavioral & Developmental Disorders); MS-LTC-DRG 887 
(Other Mental Disorder Diagnoses); MS-LTC-DRG 894 (Alcohol/Drug Abuse 
or Dependence, Left Ama); MS-LTC-DRG 895 (Alcohol/Drug Abuse or 
Dependence, with Rehabilitation Therapy); MS-LTC-DRG 896 (Alcohol/Drug 
Abuse or Dependence, without Rehabilitation Therapy with MCC); MS-LTC-
DRG 897 (Alcohol/Drug Abuse or Dependence, without Rehabilitation 
Therapy without MCC); MS-LTC-DRG 945 (Rehabilitation with CC/MCC); and 
MS-LTC-DRG 946 (Rehabilitation without CC/MCC). Under our proposals to 
implement the new dual-rate LTCH PPS payment structure required by 
statute, LTCH discharges that are grouped to these 15 ``psychiatric and 
rehabilitation'' proposed MS-LTC-DRGs would not meet the criteria for 
exclusion from the site neutral payment rate. Therefore, there are no 
applicable LTCH cases to use in calculating a proposed relative weight 
for these ``psychiatric and rehabilitation'' proposed MS-LTC-DRGs. In 
other words, under our proposed implementation of the ``criterion for a 
principal diagnosis relating to a psychiatric diagnosis or to 
rehabilitation'' (as discussed in section VII.B.3.b. of the preamble of 
this proposed rule), any LTCH PPS discharges grouped to any of the 15 
``psychiatric and rehabilitation'' proposed MS-LTC-DRGs would always be 
paid at the site neutral payment rate, and, therefore, those proposed 
MS-LTC-DRGs would never include any LTCH cases that meet the criteria 
for exclusion from the site neutral payment rate. However, section 
1886(m)(6)(B) of the Act establishes a transitional payment method for 
cases that will be paid at the site neutral payment rate for LTCH 
discharges occurring in cost reporting periods beginning during FY 2016 
or FY 2017. As discussed in detail in section VII.B.4.b. of the 
preamble of this proposed rule, for LTCH discharges occurring in cost 
reporting periods beginning on or after October 1, 2015, and on or 
before September 30, 2017 (that is, discharges occurring in cost 
reporting periods beginning during FYs 2016 and 2017), the transitional 
payment amount for site neutral payment rate cases would be a blended 
payment rate, which would be calculated as 50 percent of the applicable 
site neutral payment rate amount for the discharge and 50 percent of 
the applicable LTCH PPS standard Federal payment rate. Because the LTCH 
PPS standard Federal payment rate is based on the relative weight of 
the MS-LTC-DRG, in order to determine the proposed transitional blended 
payment for site neutral payment rate cases grouped to one of the 
``psychiatric or rehabilitation'' MS-LTC-DRGs in FY 2016, we must 
assign a relative weight to these MS-LTC-DRGs, which we are proposing 
would be the FY 2015 relative weight. We believe that using the 
respective FY 2015 relative weight for each of the ``psychiatric or 
rehabilitation'' proposed MS-LTC-DRGs would result in appropriate 
payments for LTCH cases that would be paid at the site neutral payment 
rate under the transition policy provided by the statute because there 
are no clinically similar proposed MS-LTC-DRGs for which we were able 
to determine proposed relative weights based on applicable LTCH cases 
in the FY 2014 MedPAR file data using the steps described above. 
Furthermore, we believe that it would be administratively burdensome 
and introduce unnecessary complexity to the MS-LTC-DRG relative weight 
calculation to use the LTCH discharges in the MedPAR file data to 
calculate a relative weight for those 15 ``psychiatric and 
rehabilitation'' proposed MS-LTC-DRGs to be used for the sole purpose 
of determining half of the proposed transitional blended payment for 
site neutral payment rate cases during the transition period.
    Step 6--Adjust the proposed FY 2016 MS-LTC-DRG relative weights to 
account for nonmonotonically increasing relative weights.
    As discussed earlier in this section, the MS-DRGs contain base DRGs 
that have been subdivided into one, two, or three severity of illness 
levels. Where there are three severity levels, the most severe level 
has at least one secondary diagnosis code that is referred to as an MCC 
(that is, major complication or comorbidity). The next lower severity 
level contains cases with at least one secondary diagnosis code that is 
a CC (that is, complication or comorbidity). Those cases without an MCC 
or a CC are referred to as ``without CC/MCC.'' When data do not support 
the creation of three severity levels, the base MS-DRG is subdivided 
into either two levels or the base MS-DRG is not subdivided. The two-
level subdivisions could consist of the MS-DRG with CC/MCC and the MS-
DRG without CC/MCC. Alternatively, the other type of two-level 
subdivision may consist of the MS-DRG with MCC and the MS-DRG without 
MCC.
    In those base MS-LTC-DRGs that are split into either two or three 
severity levels, cases classified into the ``without CC/MCC'' MS-LTC-
DRG are expected to have a lower resource use (and lower costs) than 
the ``with CC/MCC'' MS-LTC-DRG (in the case of a two-level split) or 
both the ``with CC'' and the ``with MCC'' MS-LTC-DRGs (in the case of a 
three-level split). That is, theoretically, cases that are more severe 
typically require greater expenditure of medical care resources and 
will result in higher average charges. Therefore, in the three severity 
levels, relative weights should increase by severity, from lowest to 
highest. If the relative weights decrease as severity increases (that 
is, if within a base MS-LTC-DRG, an MS-LTC-DRG with CC has a higher 
relative weight than one with MCC, or the MS-LTC-DRG ``without CC/MCC'' 
has a higher relative weight than either of the others), they are 
nonmonotonic. We continue to believe that utilizing nonmonotonic 
relative weights to adjust Medicare payments would result in 
inappropriate payments because the payment for the cases in the higher 
severity level in a base MS-LTC-DRG (which are generally expected to 
have higher resource use and costs) would be lower than the payment for 
cases in a lower severity level within the same base MS-LTC-DRG (which 
are generally expected to have lower resource use and costs). 
Therefore, in determining the proposed FY 2016 MS-LTC-DRG relative 
weights for LTCH PPS standard Federal payment rate payments in this 
proposed rule, consistent with our historical methodology, we are 
proposing to combine proposed MS-LTC-DRG severity levels within a base 
MS-LTC-DRG for the purpose of computing a relative weight when 
necessary to ensure that monotonicity is maintained. For a 
comprehensive description of our existing methodology to adjust for 
nonmonotonicity, we refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS 
final rule (74 FR 43964 through 43966). Any adjustments for 
nonmonotonicity that were made in determining the proposed FY 2016 MS-
LTC-DRG relative weights in this proposed rule by applying this 
methodology are denoted in Table 11, which is listed in section VI. of 
the Addendum to this final rule and is available via the Internet on 
the CMS Web site.
    Step 7--Calculate the proposed FY 2016 MS-LTC-DRG reclassification 
and recalibration budget neutrality factor.
    In accordance with the regulations at Sec.  412.517(b) (in 
conjunction with Sec.  412.503), the annual update to the MS-LTC-DRG 
classifications and relative weights is done in a budget neutral manner 
such that estimated aggregate LTCH PPS payments would be

[[Page 24550]]

unaffected, that is, would be neither greater than nor less than the 
estimated aggregate LTCH PPS payments that would have been made without 
the MS-LTC-DRG classification and relative weight changes. (For a 
detailed discussion on the establishment of the budget neutrality 
requirement for the annual update of the MS-LTC-DRG classifications and 
relative weights, we refer readers to the RY 2008 LTCH PPS final rule 
(72 FR 26881 and 26882).)
    The MS-LTC-DRG classifications and relative weights are updated 
annually based on the most recent available LTCH claims data to reflect 
changes in relative LTCH resource use (Sec.  412.517(a) in conjunction 
with Sec.  412.503). Under the budget neutrality requirement at Sec.  
412.517(b), for each annual update, the MS-LTC-DRG relative weights are 
uniformly adjusted to ensure that estimated aggregate payments under 
the LTCH PPS would not be affected (that is, decreased or increased). 
Consistent with that provision, we are proposing to update the proposed 
FY 2016 MS-LTC-DRG classifications and relative weights for LTCH PPS 
standard payment rate payments based on the most recent available LTCH 
data for applicable LTCH cases, and to apply a budget neutrality 
adjustment in determining the FY 2016 MS-LTC-DRG relative weights.
    To ensure budget neutrality in the update to the MS-LTC-DRG 
classifications and relative weights under Sec.  412.517(b), we are 
proposing to continue to use our established two-step budget neutrality 
methodology. As discussed previously in this section, this approach is 
consistent with our general policies regarding the continued use of our 
existing methodologies, as presented in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50175 through 50176)
    In this proposed rule, in the first step of our proposed MS-LTC-DRG 
budget neutrality methodology, for FY 2016, we are proposing to 
calculate and apply a normalization factor to the recalibrated proposed 
relative weights (the result of Steps 1 through 6 above) to ensure that 
estimated payments are not affected by changes in the composition of 
case types or the proposed changes to the classification system. That 
is, the normalization adjustment is intended to ensure that the 
recalibration of the proposed MS-LTC-DRG relative weights (that is, the 
process itself) neither increases nor decreases the average case-mix 
index.
    To calculate the normalization factor for FY 2016 (the first step 
of our proposed budget neutrality methodology), we are proposing to use 
the following three steps: (1.a.) We use the most recent available 
applicable LTCH cases from the most recent available data (that is, 
LTCH discharges from the FY 2014 MedPAR file) and group them using the 
proposed FY 2016 GROUPER (proposed Version 33) and the recalibrated 
proposed FY 2016 MS-LTC-DRG relative weights (determined in Steps 1 
through 6 above) to calculate the average case-mix index; (1.b.) we 
group the same applicable LTCH cases (as are used in Step 1.a.) using 
the FY 2015 GROUPER (Version 32) and FY 2015 MS-LTC-DRG relative 
weights and calculated the average case-mix index; and (1.c.) we 
compute the ratio of these average case-mix indexes by dividing the 
average CMI for FY 2015 (determined in Step 1.b.) by the average case-
mix index for FY 2016 (determined in Step 1.a.). As a result, in 
determining the proposed MS-LTC-DRG relative weights for FY 2016, each 
recalibrated proposed MS-LTC-DRG relative weight is multiplied by 
1.28176 (determined in Step 1.c.) in the first step of the proposed 
budget neutrality methodology, which produces ``normalized relative 
weights.''
    In the second step of our proposed MS-LTC-DRG budget neutrality 
methodology, we calculate a second proposed budget neutrality factor 
consisting of the ratio of estimated aggregate FY 2016 LTCH PPS 
standard Federal payment rate payments for applicable LTCH cases (the 
sum of all calculations under Step 1.a. above) after reclassification 
and recalibration to estimated aggregate payments for FY 2015 LTCH PPS 
standard Federal payment rate payments for applicable LTCH cases before 
reclassification and recalibration (that is, the sum of all 
calculations under Step 1.b. above).
    That is, for this proposed rule, for FY 2016, under the second step 
of the proposed budget neutrality methodology, we are proposing to 
determine the proposed budget neutrality adjustment factor using the 
following three steps: (2.a.) We simulate estimated total FY 2016 LTCH 
PPS standard Federal payment rate payments for applicable LTCH cases 
using the normalized proposed relative weights for FY 2016 and proposed 
GROUPER Version 33 (as described above); (2.b.) we simulate estimated 
total FY 2015 LTCH PPS standard Federal payment rate payments for 
applicable LTCH cases using the FY 2015 GROUPER (Version 32) and the FY 
2015 MS-LTC-DRG relative weights in Table 11 of the Addendum to the FY 
2015 IPPS/LTCH PPS final rule available on the Internet; and (2.c.) we 
calculate the ratio of these estimated total payments by dividing the 
value determined in Step 2.b. by the value determined in Step 2.a. In 
determining the proposed FY 2016 MS-LTC-DRG relative weights, each 
normalized proposed relative weight is then multiplied by a budget 
neutrality factor of 0.996599 (the value determined in Step 2.c.) in 
the second step of the proposed budget neutrality methodology to 
determine the proposed budget neutral FY 2016 relative weight for each 
proposed MS-LTC-DRG.
    Accordingly, in determining the proposed FY 2016 MS-LTC-DRG 
relative weights in this proposed rule, consistent with our existing 
methodology, we are proposing to apply a normalization factor of 
1.28176 and a budget neutrality factor of 0.996599 (computed as 
described above). Table 11, which is listed in section VI. of the 
Addendum to this proposed rule and is available via the Internet, lists 
the proposed MS-LTC-DRGs and their respective proposed relative 
weights, geometric mean length of stay, five-sixths of the geometric 
mean length of stay (used to identify SSO cases under Sec.  
412.529(a)), and the ``IPPS Comparable Thresholds'' (used in 
determining SSO payments under Sec.  412.529(c)(3)), for FY 2016 (and 
reflect both the proposed normalization factor of 1.28176 and the 
proposed budget neutrality factor of 0.996599).

D. Proposed Changes to the LTCH PPS Standard Federal Payment Rates for 
FY 2016

1. Overview of Development of the LTCH PPS Standard Federal Payment 
Rates
    The basic methodology for determining LTCH PPS standard Federal 
prospective payment rates is set forth at Sec.  412.515 through Sec.  
412.536. In this section, we discuss the factors that we are proposing 
to use to update the LTCH PPS standard Federal payment rate for FY 
2016, that is, effective for LTCH discharges occurring on or after 
October 1, 2015 through September 30, 2016. As previously discussed, 
under the dual-rate LTCH PPS payment structure required by statute, we 
are proposing that, beginning with FY 2016, only LTCH discharges that 
meet the criteria for exclusion from the site neutral payment rate 
would be paid based on the LTCH PPS standard Federal payment rate 
specified at Sec.  412.523. (For additional details on our proposals 
related to the dual-rate LTCH PPS payment structure required by 
statute, we refer readers to section VII.C. of the preamble of this 
proposed rule.)

[[Page 24551]]

    For details on the development of the initial FY 2003 standard 
Federal rate, we refer readers to the August 30, 2002 LTCH PPS final 
rule (67 FR 56027 through 56037). For subsequent updates to the LTCH 
PPS standard Federal rate as implemented under Sec.  412.523(c)(3), we 
refer readers to the following final rules: RY 2004 LTCH PPS final rule 
(68 FR 34134 through 34140); RY 2005 LTCH PPS final rule (68 FR 25682 
through 25684); RY 2006 LTCH PPS final rule (70 FR 24179 through 
24180); RY 2007 LTCH PPS final rule (71 FR 27819 through 27827); RY 
2008 LTCH PPS final rule (72 FR 26870 through 27029); RY 2009 LTCH PPS 
final rule (73 FR 26800 through 26804); FY 2010 IPPS/RY 2010 LTCH PPS 
final rule (74 FR 44021 through 44030); FY 2011 IPPS/LTCH PPS final 
rule (75 FR 50443 through 50444); FY 2012 IPPS/LTCH PPS final rule (76 
FR 51769 through 51773); FY 2013 IPPS/LTCH PPS final rule (77 FR 53479 
through 53481); FY 2014 IPPS/LTCH PPS final rule (78 FR 50760 through 
50765); and FY 2015 IPPS/LTCH PPS final rule (79 FR 50176 through 
50180).
    In this FY 2016 proposed rule, we present our proposals related to 
the proposed annual update to the LTCH PPS standard Federal payment 
rate for FY 2016, which includes the proposed annual market basket 
update. Consistent with our historical practice of using the best data 
available, we also are proposing to use more recent data, if available, 
to determine the FY 2016 annual market basket update to the LTCH PPS 
standard Federal payment rate in the final rule.
    The application of the proposed update to the LTCH PPS standard 
Federal payment rate for FY 2016 is presented in section V.A. of the 
Addendum to this proposed rule. The components of the proposed annual 
market basket update to the LTCH PPS standard Federal payment rate for 
FY 2016 are discussed below, including the reduction to the annual 
update for LTCHs that fail to submit quality reporting data for fiscal 
year FY 2016 as required by the statute (as discussed in section 
VII.D.2.c. of the preamble of this proposed rule). In addition, as 
discussed in section V.A. of the Addendum of this proposed rule, we are 
proposing to make an adjustment to the LTCH PPS standard Federal 
payment rate to account for the estimated effect of the changes to the 
area wage level adjustment for FY 2016 on estimated aggregate LTCH PPS 
payments, in accordance with Sec.  412.523(d)(4).
2. Proposed FY 2016 LTCH PPS Annual Market Basket Update
a. Overview
    Historically, the Medicare program has used a market basket to 
account for price increases in the services furnished by providers. The 
market basket used for the LTCH PPS includes both operating and 
capital-related costs of LTCHs because the LTCH PPS uses a single 
payment rate for both operating and capital-related costs. As discussed 
in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53468 through 53476), we 
adopted the newly created FY 2009-based LTCH-specific market basket for 
use under the LTCH PPS beginning in FY 2013. For additional details on 
the historical development of the market basket used under the LTCH 
PPS, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53467 through 53468).
    Section 3401(c) of the Affordable Care Act provides for certain 
adjustments to any annual update to the LTCH PPS standard Federal 
payment rate and refers to the timeframes associated with such 
adjustments as a ``rate year'' (which are discussed in more detail in 
section VII.C.2.b. of the preamble of this final rule.) We note that 
because the annual update to the LTCH PPS policies, rates, and factors 
now occurs on October 1, we adopted the term ``fiscal year'' (FY) 
rather than ``rate year'' (RY) under the LTCH PPS beginning October 1, 
2010, to conform with the standard definition of the Federal fiscal 
year (October 1 through September 30) used by other PPSs, such as the 
IPPS (75 FR 50396 through 50397). Although the language of sections 
3004(a), 3401(c), 10319, and 1105(b) of the Affordable Care Act refers 
to years 2010 and thereafter under the LTCH PPS as ``rate year,'' 
consistent with our change in the terminology used under the LTCH PPS 
from ``rate year'' to ``fiscal year,'' for purposes of clarity, when 
discussing the annual update for the LTCH PPS standard Federal payment 
rate, including the provisions of the Affordable Care Act, we use 
``fiscal year'' rather than ``rate year'' for 2011 and subsequent 
years.
b. Proposed Revision of Certain Market Basket Updates as Required by 
the Affordable Care Act
    Section 1886(m)(3)(A) of the Act, as added by section 3401(c) of 
the Affordable Care Act, specifies that, for rate year 2010 and each 
subsequent rate year through 2019, any annual update to the LTCH PPS 
standard Federal payment rate shall be reduced:
     For rate year 2010 through 2019, by the ``other 
adjustment'' specified in sections 1886(m)(3)(A)(ii) and (m)(4) of the 
Act; and
     For rate year 2012 and each subsequent year, by the 
productivity adjustment (which we refer to as ``the multifactor 
productivity (MFP) adjustment'') described in section 
1886(b)(3)(B)(xi)(II) of the Act.
    Section 1886(m)(3)(B) of the Act provides that the application of 
paragraph (3) of section 1886(m) of the Act may result in the annual 
update being less than zero for a rate year, and may result in payment 
rates for a rate year being less than such payment rates for the 
preceding rate year.
    Section 1886(b)(3)(B)(xi)(II) of the Act defines the MFP adjustment 
as equal to the 10-year moving average of changes in annual economy-
wide, private nonfarm business multifactor productivity (as projected 
by the Secretary for the 10-year period ending with the applicable 
fiscal year, calendar year, cost reporting period, or other annual 
period). Under our methodology, the end of the 10-year moving average 
of changes in the MFP coincides with the end of the appropriate FY 
update period. In addition, the MFP adjustment that is applied in 
determining any annual update to the LTCH PPS standard Federal payment 
rate is the same adjustment that is required to be applied in 
determining the applicable percentage increase under the IPPS under 
section 1886(b)(3)(B)(i) of the Act as they are both based on a fiscal 
year. We refer readers to section IV.A.1. of the preamble of this 
proposed rule for more information on the proposed FY 2016 MFP 
adjustment.
c. Proposed Adjustment to the Annual Update to the LTCH PPS Standard 
Federal Payment Rate Under the Long-Term Care Hospital Quality 
Reporting Program (LTCH QRP)
    In accordance with section 1886(m)(5) of the Act, as added by 
section 3004(a) of the Affordable Care Act, the Secretary established 
the Long-Term Care Hospital Quality Reporting Program (LTCH QRP). The 
reduction in the annual update to the LTCH PPS standard Federal payment 
rate for failure to report quality data under the LTCH QRP for FY 2014 
and subsequent fiscal years is codified under Sec.  412.523(c)(4) of 
the regulations. (As previously noted, although the language of section 
3004(a) of the Affordable Care Act refers to years 2011 and thereafter 
under the LTCH PPS as ``rate year,'' consistent with our change in the 
terminology used under the LTCH PPS from ``rate year'' to ``fiscal 
year,'' for

[[Page 24552]]

purposes of clarity, when discussing the annual update for the LTCH 
PPS, including the provisions of the Affordable Care Act, we use 
``fiscal year'' rather than ``rate year'' for 2011 and subsequent 
years.) The LTCH QRP, as required for FY 2014 and beyond by section 
1886(m)(5)(A)(i) of the Act, applies a 2.0 percentage point reduction 
to any update under Sec.  412.523(c)(3) for an LTCH that does not 
submit quality reporting data to the Secretary in accordance with 
section 1886(m)(5)(C) of the Act with respect to such a year (that is, 
in the form and manner and at the time specified by the Secretary under 
the LTCH QRP) (Sec.  412.523(c)(4)(i)). Section 1886(m)(5)(A)(ii) of 
the Act provides that the application of the 2.0 percentage points 
reduction may result in an annual update that is less than 0.0 for a 
year, and may result in LTCH PPS payment rates for a year being less 
than such LTCH PPS payment rates for the preceding year (Sec.  
412.523(c)(4)(iii)). Furthermore, section 1886(m)(5)(B) of the Act 
specifies that the 2.0 percentage points reduction is applied in a 
noncumulative manner, such that any reduction made under section 
1886(m)(5)(A) of the Act shall apply only with respect to the year 
involved, and shall not be taken into account in computing the LTCH PPS 
payment amount for a subsequent year (Sec.  412.523(c)(4)(ii)). We 
discuss the application of the 2.0 percentage point reduction under 
Sec.  412.523(c)(4)(i) in our discussion of the annual market basket 
update to the LTCH PPS standard Federal payment rate for FY 2016 in 
section VII.D.2.e. of the preamble of this proposed rule. (For 
additional information on the history of the LTCH QRP, including the 
statutory authority and the selected measures, we refer readers to 
section VIII.C. of the preamble of this proposed rule.)
d. Proposed Market Basket Under the LTCH PPS for FY 2016
    Under the authority of section 123 of the BBRA as amended by 
section 307(b) of the BIPA, we adopted a newly created FY 2009-based 
LTCH-specific market basket for use under the LTCH PPS beginning in FY 
2013. The FY 2009-based LTCH-specific market basket is based solely on 
the Medicare cost report data submitted by LTCHs and, therefore, 
specifically reflects the cost structures of only LTCHs. For additional 
details on the development of the FY 2009-based LTCH-specific market 
basket, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53467 through 53476).
    For FY 2016, we are proposing to continue to use the FY 2009-based 
LTCH-specific market basket to update the LTCH PPS for FY 2016. We 
continue to believe that the FY 2009-based LTCH-specific market basket 
appropriately reflects the cost structure of LTCHs for the reasons 
discussed when we adopted the FY 2009-based LTCH-specific market basket 
for use under the LTCH PPS in the FY 2013 IPPS/LTCH PPS final rule (77 
FR 53467 through 53476).
e. Proposed Annual Market Basket Update for LTCHs for FY 2016
    Consistent with our historical practice, we estimate the market 
basket update and the MFP adjustment based on IGI's forecast using the 
most recent available data. Based on IGI's first quarter 2015 forecast, 
the proposed FY 2016 full market basket estimate for the LTCH PPS using 
the FY 2009-based LTCH-specific market basket is 2.7 percent. The 
current estimate of the MFP adjustment for FY 2016 based on IGI's first 
quarter 2015 forecast is 0.6 percent, as discussed in section IV.A. of 
the preamble of this proposed rule. In addition, consistent with our 
historical practice, we are proposing that if more recent data become 
subsequently available (for example, a more recent estimate of the 
market basket and the MFP adjustment), we would use such data, if 
appropriate, to determine the FY 2016 market basket update and the MFP 
adjustment in the final rule.
    For FY 2016, section 1886(m)(3)(A)(i) of the Act requires that any 
annual update to the LTCH PPS standard Federal payment rate be reduced 
by the productivity adjustment (``the MFP adjustment'') described in 
section 1886(b)(3)(B)(xi)(II) of the Act. Consistent with the statute, 
we are proposing to reduce the full proposed FY 2016 market basket 
update by the proposed FY 2016 MFP adjustment. To determine the 
proposed market basket update for LTCHs for FY 2016, as reduced by the 
MFP adjustment, consistent with our established methodology, we 
subtract the proposed FY 2016 MFP adjustment from the proposed FY 2016 
market basket update. Furthermore, sections 1886(m)(3)(A)(ii) and 
1886(m)(4)(E) of the Act requires that any annual update to the LTCH 
PPS standard Federal payment rate for FY 2016 be reduced by the ``other 
adjustment'' described in paragraph (4), which is 0.2 percentage point 
for FY 2016. Therefore, following application of the productivity 
adjustment, we are further proposing to reduce the adjusted proposed 
market basket update (that is, the full proposed market basket increase 
less the proposed MFP adjustment) by the ``other adjustment'' specified 
by sections 1886(m)(3)(A)(ii) and 1886(m)(4) of the Act. (For 
additional details on our established methodology for adjusting the 
market basket increase by the MFP and the ``other adjustment'' required 
by the statute, we refer readers to the FY 2012 IPPS/LTCH PPS final 
rule (76 FR 51771).)
    For FY 2016, section 1886(m)(5) of the Act requires that for LTCHs 
that do not submit quality reporting data as required under the LTCHQR 
Program, any annual update to an LTCH PPS standard Federal payment 
rate, after application of the adjustments required by section 
1886(m)(3) of the Act, shall be further reduced by 2.0 percentage 
points. Therefore, the proposed update to the LTCH PPS standard Federal 
payment rate for FY 2016 for LTCHs that fail to submit quality 
reporting data under the LTCH QRP, the full proposed LTCH PPS market 
basket increase estimate, subject to an adjustment based on changes in 
economy-wide productivity (``the MFP adjustment'') as required under 
section 1886(m)(3)(A)(i) of the Act and an additional reduction 
required by sections 1886(m)(3)(A)(ii) and 1886(m)(4) of the Act, will 
also be further reduced by 2.0 percentage points.
    In this proposed rule, in accordance with the statute, we are 
reducing the proposed FY 2016 full market basket estimate of 2.7 
percent (based on IGI's first quarter 2015 forecast of the FY 2009-
based LTCH-specific market basket) by the proposed FY 2016 MFP 
adjustment of 0.6 percentage point (based on IGI's first quarter 2015 
forecast). Following application of the productivity adjustment, the 
adjusted proposed market basket update of 2.1 percent (2.7 percent 
minus 0.6 percentage point) is then reduced by 0.2 percentage point, as 
required by sections 1886(m)(3)(A)(ii) and 1886(m)(4)(E) of the Act. 
Therefore, in this proposed rule, under the authority of section 123 of 
the BBRA as amended by section 307(b) of the BIPA, we are proposing to 
establish a proposed annual market basket update under to the LTCH PPS 
standard Federal payment rate for FY 2016 of 1.9 percent (that is, the 
most recent estimate of the LTCH PPS market basket proposed update of 
2.7 percent, less the proposed MFP adjustment of 0.6 percentage point, 
and less the 0.2 percentage point required under section 1886(m)(4)(E) 
of the Act). Accordingly, consistent with our proposal, we are 
proposing to revise Sec.  412.523(c)(3) by adding a new paragraph 
(xii), which specifies that the LTCH PPS standard Federal payment rate 
for FY 2016 is the LTCH PPS standard Federal payment rate for the

[[Page 24553]]

previous LTCH PPS year updated by 1.9 percent, and as further adjusted, 
as appropriate, as described in Sec.  412.523(d). For LTCHs that fail 
to submit quality reporting data under the LTCH QRP, under Sec.  
412.523(c)(3)(xi) in conjunction with Sec.  412.523(c)(4), we are 
proposing to further reduce the proposed annual update to the LTCH PPS 
standard Federal payment rate by 2.0 percentage points in accordance 
with section 1886(m)(5) of the Act. Accordingly, consistent with our 
proposal, we are proposing to establish a proposed annual update to the 
LTCH PPS standard Federal payment rate of -0.1 percent (that is, 1.9 
percent minus 2.0 percentage points) for FY 2016 for LTCHs that fail to 
submit quality reporting data as required under the LTCH QRP. As stated 
above, consistent with our historical practice, we are proposing that 
if more recent data become subsequently available (for example, a more 
recent estimate of the market basket and the MFP adjustment) we would 
use such data, if appropriate, to establish an annual update to the 
LTCH PPS standard Federal payment rate for FY 2016 under Sec.  
412.523(c)(3)(xii) in the final rule. (We note that we also are 
adjusting the proposed FY 2016 LTCH PPS standard Federal payment rate 
by an area wage level budget neutrality factor in accordance with Sec.  
412.523(d)(4) (as discussed in section V.B.5. of the Addendum of this 
proposed rule).)

E. Moratoria on the Establishment of LTCHs and LTCH Satellite 
Facilities and on the Increase in the Number of Beds in Existing LTCHs 
and LTCH Satellite Facilities

    Section 1206(b)(2) of Public Law 113-67, as amended by section 
112(b) of the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 
113-93), established ``new'' statutory moratoria on the establishment 
of new LTCHs and LTCH satellite facilities and on the increase in the 
number of hospital beds in existing LTCHs and LTCH satellite 
facilities. For a discussion on our implementation of these moratoria, 
we refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 50189 
through 50193). Since the implementation of these LTCH PPS policy 
moratoria, we have been informed that some confusion may exist 
regarding the exceptions to the moratorium on the establishment of new 
LTCH and LTCH satellite facilities, as well as the application of the 
moratorium on an increase in the number of beds in existing LTCH and 
LTCH satellite facilities.
    Under existing regulations at 42 CFR 412.23(e)(6), we specify that, 
to qualify for an exception under the moratorium to establish a new 
LTCH or LTCH satellite facility during the timeframe between April 1, 
2014, and September 30, 2017, a hospital or entity must meet the 
following criteria:
     The hospital or entity must have begun its qualifying 
period for payment as an LTCH in accordance with Sec.  412.23(e).
     The hospital or entity must have a binding written 
agreement with an outside, unrelated party for the actual construction, 
renovation, lease, or demolition for an LTCH, and must have expended 
before April 1, 2014, at least 10 percent of the estimated cost of the 
project or, if less, $2,500,000.
     The hospital or entity must have obtained an approved 
certificate of need in a State where one is required.
    We believe that the existing regulation text regarding the 
moratorium on the establishment and classification of new LTCHs and 
LTCH satellite facilities could be misread as requiring fulfillment of 
all three conditions in order to qualify for an exception to the 
moratorium on the establishment of new LTCH and LTCH satellite 
facilities. This was not our intent, and we acknowledge that 
implementing the moratorium in that manner would have been directly 
contradictory to the statutory requirement. Technically, while we did 
not explicitly specify in the regulations text under Sec.  412.23(e)(6) 
that only one of the listed criteria had to be met in order to qualify 
for an exception to the moratorium on the establishment of new LTCHs 
and LTCH satellite facilities (the language text states ``as 
applicable''), we clearly stated it in the preamble of the FY 2015 
IPPS/LTCH PPS final rule. (We refer readers to the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50189 through 50193).) In addition, the 
requirement that one of the three exceptions had to be met in order to 
qualify for an exception to the moratorium was also indicated in our 
proposal to implement the initial application of the moratorium during 
the FY 2009 rulemaking cycle. (We refer readers to the FY 2009 IPPS/
LTCH PPS final rule (73 FR 29705).)
    As we stated in the preamble of the FY 2015 IPPS/LTCH PPS final 
rule), the provisions in the new moratorium are nearly identical to the 
language in the prior ``expired'' moratorium under section 114(d) of 
MMSEA (Pub. L. 110-173). As also noted, the mechanics of exceptions to 
the new and expired moratoria on the establishment of new LTCHs and 
LTCH satellite facilities are analogous. Therefore, except as noted, to 
the extent that the new and expired moratoria were consistent, we 
proposed and adopted the identical implementation mechanisms. To 
minimize the confusion that may exist as a result of the existing 
regulations text, we are proposing to revise the regulations under 
Sec.  412.23(e)(6)(ii) to more accurately convey the established policy 
that only one of the statutory conditions, as applicable, needs to be 
met in order to qualify for the exception to the new moratorium on the 
establishment of new LTCH and LTCH satellite facilities.
    We have become aware of some confusion concerning what constitutes 
the ``estimated cost of the project'' with regard to the second 
exception. To alleviate confusion, we are clarifying our longstanding 
policy on what constitutes the ``estimated cost of the project.'' In 
discussing this exception in the FY 2015 IPPS/LTCH PPS final rule (79 
FR 50189 through 50193), we noted that the ``cost of the project'' 
included the activities (plural) that were enumerated in the first 
prong of the exception. Those enumerated activities included ``the 
actual construction, renovation, lease, or demolition for a long-term 
care hospital.'' That is, our policy is that the sum total of any costs 
associated with any of the enumerated activities that comprised the 
project as a whole (with the project being the establishment of a new 
LTCH or a new LTCH satellite facility) would be considered in 
determining whether the facility met the amount specified in the 
statute. In using an ``or'' in this list of activities, we intended to 
acknowledge that any one project may or may not include every element 
listed (for example, new construction may not include any demolition), 
but if it does include an element, our policy is that the cost of that 
element and the costs of any other of the listed elements in the 
project are to be summed to determine the total cost of the project. 
Therefore, under our longstanding policy, when determining whether 10 
percent of the estimated cost of the project had been expended prior to 
the start of the moratorium, the ``project'' is the establishment of a 
new LTCH or LTCH satellite facility, not any one element that, when 
combined with other elements listed in the first prong, would lead to 
the establishment of the LTCH or LTCH satellite facility. For example, 
if an entity has expended 10 percent of the costs of demolition, but 
that amount is less than both 10 percent of the estimated cost of the 
project, and less than the $2,500,000.00 ceiling amount, the entity 
would not qualify for this exception to the moratorium.
    In addition, we are taking this opportunity to provide additional 
clarification on our policy concerning

[[Page 24554]]

the moratorium on increases in the number of beds in existing LTCH and 
LTCH satellite facilities. As we noted in the FY 2015 IPPS/LTCH PPS 
final rule, while the expired moratorium specifically included an 
exception to the moratorium on the increase in the number of beds in 
existing LTCHs and LTCH satellite facilities, the new moratorium under 
section 1206(b)(2)(B) of Public Law 113-67 expressly noted that the 
exceptions to the expired moratoria would not apply under the ``new'' 
moratoria. Further amendments made by section 112(b) of Public Law 113-
93, which create the exceptions to the current moratoria, did not 
change that express omission (79 FR 50189 through 50193). Given the 
lack of any exception to the new moratorium on increasing the number of 
beds in an existing LTCH or LTCH satellite facility, an LTCH may not 
increase the total number of Medicare certified beds beyond the number 
that existed prior to April 1, 2014, including when an existing LTCH 
meets one of the exceptions to the moratorium on the establishment of a 
new LTCH satellite facility. An LTCH satellite facility's beds 
historically have been, and continue to be, counted as the LTCH's beds. 
Therefore, under our existing regulation at Sec.  412.23(e)(7)(iii), an 
existing LTCH cannot, through meeting the criteria for an exception to 
the new moratorium on the establishment of a new LTCH satellite 
facility, increase its total number of Medicare certified beds by 
establishing any number beds at the new LTCH satellite facility that 
would result in the total number of Medicare certified beds in that 
LTCH exceeding what existed prior to April 1, 2014. That is, if an 
existing LTCH meets one of the statutory exceptions and opens a new 
LTCH satellite facility during the moratorium, that new LTCH satellite 
facility's beds must come from the movement of beds in existence prior 
to April 1, 2014, from other locations of the existing LTCH to the new 
LTCH satellite facility. This requirement also applies to any remote 
locations that may be established by an existing LTCH during the 
moratorium on new beds.

F. Proposed Changes to Average Length of Stay Criterion Under Public 
Law 113-67 (Sec.  412.23)

    We are proposing to revise Sec.  412.23 to implement the statutory 
changes to the calculation of the average length of stay for an LTCH 
under section 1206(a)(3) of Public Law 113-67. As required by section 
1861(ccc) of the Act, in order for a hospital to be classified as an 
LTCH, it must maintain an average length of stay of greater than 25 
days as calculated by the Secretary (or meet the requirements of clause 
(II) of section 1886(d)(1)(B)(iv) of the Act). Currently, the Medicare 
average length of stay is calculated, in accordance with Sec.  
412.23(e)(3) of the regulations, by dividing the total number of 
covered and noncovered Medicare inpatient days by the total number of 
Medicare discharges. This calculation currently includes Medicare 
inpatient days and discharges that are paid under a Medicare Advantage 
(MA) plan. (For a full discussion of the inclusion of MA days in the 
average length of stay calculation, we refer readers to the FY 2012 
IPPS/LTCH PPS final rule (76 FR 51774).)
    Section 1206(a)(3)(A) of Public Law 113-67 specifies that, in 
general, for discharges occurring in cost reporting periods beginning 
on or after October 1, 2015, applicable total Medicare inpatient days 
and discharges that are paid at the site neutral payment rate 
(discussed in section VII.B. of the preamble of this proposed rule), or 
for which payments are made under an MA plan, are to be excluded from 
the calculation of an LTCH's average length of stay. In addition, 
section 1206(a)(3)(B) of Public Law 113-67 further requires that the 
exclusion of these inpatient days and discharges from the average 
length of stay calculation shall not apply to an LTCH that was 
classified as a subsection (d) hospital (as defined in section 
1886(d)(1)(B) the Act) as of December 10, 2013. Therefore, under the 
broad authority conferred upon the Secretary under section 123(a)(1) of 
the BBRA, as amended by section 307(b) of the BIPA and in accordance 
with section 1206(a) of Public Law 113-67, we are proposing to revise 
Sec.  412.23 of the regulations to incorporate the statutory changes to 
the average length of stay calculation required by section 1206(a) of 
Public Law 113-67. Specifically, we are proposing to revise Sec.  
412.23 by adding a new paragraph (e)(3)(vi) to specify that Medicare 
inpatient days and discharges paid at the site neutral payment rate or 
under an MA plan will not be included in the calculation of an LTCH's 
average length of stay. Furthermore, we proposing to add new paragraph 
(e)(3)(vii) to Sec.  412.23 to specify that the provisions of the 
proposed new paragraph (vi) will not apply to an LTCH that was 
classified as a subsection (d) hospital (as defined in section 
1886(d)(1)(B) the Act) as of December 10, 2013, consistent with the 
statute.

VIII. Quality Data Reporting Requirements for Specific Providers and 
Suppliers

    We seek to promote higher quality and more efficient healthcare for 
Medicare beneficiaries. This effort is supported by the adoption of 
widely agreed-upon quality measures. We have worked with relevant 
stakeholders to define quality measures for most settings and to 
measure various aspects of care for most Medicare beneficiaries. These 
measures assess structural aspects of care, clinical processes, patient 
experiences with care, care coordination, and improving patient 
outcomes.
    We have implemented quality reporting programs for multiple care 
settings, including:
     Hospital inpatient services under the Hospital Inpatient 
Quality Reporting (IQR) Program (formerly referred to as the Reporting 
Hospital Quality Data for Annual Payment Update (RHQDAPU) Program);
     Hospital outpatient services under the Hospital Outpatient 
Quality Reporting (OQR) Program (formerly referred to as the Hospital 
Outpatient Quality Data Reporting Program (HOP QDRP));
     Care furnished by physicians and other eligible 
professionals under the Physician Quality Reporting System (PQRS, 
formerly referred to as the Physician Quality Reporting Program 
Initiative (PQRI));
     Inpatient rehabilitation facilities under the Inpatient 
Rehabilitation Facility Quality Reporting Program (IRF QRP);
     Long-term care hospitals under the Long-Term Care Hospital 
Quality Reporting Program (LTCH QRP) (also referred to as the LTCHQR 
Program);
     PPS-exempt cancer hospitals under the PPS-Exempt Cancer 
Hospital Quality Reporting (PCHQR) Program;
     Ambulatory surgical centers under the Ambulatory Surgical 
Center Quality Reporting (ASCQR) Program;
     Inpatient psychiatric facilities under the Inpatient 
Psychiatric Facilities Quality Reporting (IPFQR) Program;
     Home health agencies under the home health quality 
reporting program (HH QRP); and,
     Hospice facilities under the Hospice Quality Reporting 
Program.
    We have also implemented the End-Stage Renal Disease Quality 
Incentive Program and Hospital VBP Program (described further below) 
that link payment to performance.
    In implementing the Hospital IQR Program and other quality 
reporting

[[Page 24555]]

programs, we have focused on measures that have high impact and support 
CMS and HHS priorities for improved quality and efficiency of care for 
Medicare beneficiaries. Our goal for the future is to align the 
clinical quality measure requirements of the Hospital IQR Program with 
various other Medicare and Medicaid programs, including those 
authorized by the Health Information Technology for Economic and 
Clinical Health (HITECH) Act, so that the reporting burden on providers 
will be reduced. As appropriate, we will consider the adoption of 
clinical quality measures with electronic specifications so that the 
electronic collection of performance information is a seamless 
component of care delivery. Establishing such a system will require 
interoperability between EHRs and CMS data collection systems, 
additional infrastructure development on the part of hospitals and CMS, 
and adoption of standards for capturing, formatting, and transmitting 
the data elements that make up the measures. However, once these 
activities are accomplished, adoption of measures that rely on data 
obtained directly from EHRs will enable us to expand the Hospital IQR 
Program measure set with less cost and reporting burden to hospitals. 
We believe that in the near future, collection and reporting of data 
elements through EHRs will greatly simplify and streamline reporting 
for various CMS quality reporting programs, and that hospitals will be 
able to switch primarily to EHR-based data reporting for many measures 
that are currently manually chart-abstracted and submitted to CMS for 
the Hospital IQR Program.
    We also have implemented a Hospital VBP Program under section 
1886(o) of the Act, described in the Hospital Inpatient VBP Program 
final rule (76 FR 26490 through 26547). We most recently adopted 
additional policies for the Hospital VBP Program in section IV.I. of 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50048 through 50087). Under 
the Hospital VBP Program, hospitals receive value-based incentive 
payments based on their performance with respect to performance 
standards for a performance period for the fiscal year involved. The 
measures under the Hospital VBP Program must be selected from the 
measures (other than readmission measures) specified under the Hospital 
IQR Program as required by section 1886(o)(2)(A) of the Act.
    In selecting measures for the Hospital IQR Program, we are mindful 
of the conceptual framework we have developed for the Hospital VBP 
Program. Given that measures adopted for the Hospital VBP Program must 
first have been specified under the Hospital IQR Program, these two 
programs are linked and the reporting infrastructure for the programs 
overlap. We view the Hospital VBP Program as the next step in promoting 
higher quality care for Medicare beneficiaries by transforming Medicare 
from a passive payer of claims into an active purchaser of quality 
healthcare for its beneficiaries. Value-based purchasing is an 
important step to revamping how care and services are paid for, moving 
increasingly toward rewarding better value, outcomes, and innovations.
    We also view the Hospital-Acquired Condition (HAC) payment 
adjustment program authorized by section 1886(p) of the Act, as added 
by section 3008 of the Affordable Care Act, and the Hospital VBP 
Program, as related but separate efforts to reduce HACs. The Hospital 
VBP Program is an incentive program that awards payments to hospitals 
based on quality performance on a wide variety of measures, while the 
HAC Reduction Program creates a payment adjustment resulting in payment 
reductions for poorly performing hospitals based on their rates of 
HACs.
    In the preamble of this proposed rule, we are proposing changes to 
the following Medicare quality reporting systems:
     In section VIII.A., the Hospital IQR Program.
     In section VIII.B., the PCHQR Program.
     In section VIII.C., the LTCH QRP.
    In addition, in section VIII.D. of the preamble of this proposed 
rule, we are proposing changes to the Medicare EHR Incentive Program 
for eligible hospitals and CAHs.

A. Hospital Inpatient Quality Reporting (IQR) Program

1. Background
a. History of the Hospital IQR Program
    We refer readers to the FY 2010 IPPS/RY 2010 LTCH PPS final rule 
(74 FR 43860 through 43861) and the FY 2011 IPPS/LTCH PPS final rule 
(75 FR 50180 through 50181) for detailed discussions of the history of 
the Hospital IQR Program, including the statutory history, and to the 
FY 2015 IPPS/LTCH PPS final rule (79 FR 50217 through 50249) for the 
measures we have adopted for the Hospital IQR measure set through the 
FY 2017 payment determination and subsequent years.
b. Maintenance of Technical Specifications for Quality Measures
    The technical specifications for the Hospital IQR Program measures, 
or links to Web sites hosting technical specifications, are contained 
in the CMS/The Joint Commission (TJC) Specifications Manual for 
National Hospital Quality Measures (Specifications Manual). This 
Specifications Manual is posted on the QualityNet Web site at http://www.qualitynet.org/. We generally update the Specifications Manual on a 
semiannual basis and include in the updates detailed instructions and 
calculation algorithms for hospitals to use when collecting and 
submitting data on required measures. These semiannual updates are 
accompanied by notifications to users, providing sufficient time 
between the change and the effective date in order to allow users to 
incorporate changes and updates to the specifications into data 
collection systems.
    The technical specifications for the HCAHPS patient experience of 
care survey are contained in the current HCAHPS Quality Assurance 
Guidelines manual available at the HCAHPS Web site, http://www.hcahpsonline.org. We maintain the HCAHPS technical specifications 
by updating the HCAHPS Quality Assurance Guidelines manual annually, 
and include detailed instructions on survey implementation, data 
collection, data submission and other relevant topics. As necessary, 
HCAHPS Bulletins are issued to provide notice of changes and updates to 
technical specifications in HCAHPS data collection systems.
    Many of the quality measures used in different Medicare and 
Medicaid reporting programs are endorsed by the National Quality Forum 
(NQF). As part of its regular maintenance process for endorsed 
performance measures, the NQF requires measure stewards to submit 
annual measure maintenance updates and undergo maintenance of 
endorsement review every three years. We refer readers to the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50202 through 50203) for additional 
detail on the measure maintenance process.
    We believe that it is important to have in place a subregulatory 
process to incorporate nonsubstantive updates to the measure 
specifications for measures we have adopted for the Hospital IQR 
Program so that these measures remain up-to-date. We refer readers to 
the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504 through 53505) and 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50203) for our policy for 
using the subregulatory process to make non-substantive updates to 
measures used for the Hospital IQR Program. We recognize that some 
changes made to NQF-endorsed measures undergoing

[[Page 24556]]

maintenance review are substantive in nature and might not be 
appropriate for adoption using a subregulatory process. We will 
continue to use rulemaking to adopt substantive updates made to 
measures we have adopted for the Hospital IQR Program.
c. Public Display of Quality Measures
    Section 1886(b)(3)(B)(viii)(VII) of the Act was amended by the 
Deficit Reduction Act (DRA) of 2005. Section 5001(a) of the DRA 
requires that the Secretary establish procedures for making information 
regarding measures submitted available to the public after ensuring 
that a hospital has the opportunity to review its data before they are 
made public. We refer readers to the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50776 through 50778) for a more detailed discussion about public 
display of quality measures. We are not proposing to change our current 
policy of reporting data from the Hospital IQR Program as soon as it is 
feasible on CMS Web sites such as the Hospital Compare Web site http://www.medicare.gov/hospitalcompare and/or the interactive https://data.medicare.gov Web site, after a preview period.
    The Hospital Compare Web site is an interactive Web tool that 
assists beneficiaries by providing information on hospital quality of 
care to those who need to select a hospital. For more information on 
measures reported to Hospital Compare, we refer readers to the Web site 
at: http://www.medicare.gov/hospitalcompare. Other information not 
reported to Hospital Compare may be made available on other CMS Web 
sites such as http://www.cms.hhs.gov/HospitalQualityInits/ or https://data.medicare.gov.
2. Process for Retaining Previously Adopted Hospital IQR Program 
Measures for Subsequent Payment Determinations
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53512 through 53513), for our finalized measure retention policy. When 
we adopt measures for the Hospital IQR Program beginning with a 
particular payment determination, these measures are automatically 
adopted for all subsequent payment determinations unless we propose to 
remove, suspend, or replace the measures.
    We are not proposing any changes to our policy for retaining 
previously adopted measures for subsequent payment determinations.
3. Removal and Suspension of Hospital IQR Program Measures
a. Considerations in Removing Quality Measures From the Hospital IQR 
Program
    As discussed above, we generally retain measures from the previous 
year's Hospital IQR Program measure set for subsequent years' measure 
sets except when we specifically propose to remove, suspend, or replace 
a measure. We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 
FR 50185) and the FY 2015 IPPS/LTCH PPS final rule (79 FR 50203 through 
50204) for more information on the criteria we consider for removing 
quality measures. We also take into account the views of the Measure 
Applications Partnership (MAP) when determining when a measure should 
be removed, and we strive to eliminate redundancy of similar measures 
(77 FR 53505 through 53506). In the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 50203 through 50204), we also finalized our proposal to clarify 
the criteria for determining when a measure is ``topped out.'' We are 
not proposing any changes to the two criteria that we use to determine 
whether or not a measure is ``topped out.''
    We use these previously adopted measure removal criteria to help 
evaluate when we should propose a measure for removal. However, we 
continue to believe that there are circumstances in which a measure 
that meets criteria for removal should be retained regardless, because 
the drawbacks of removing a measure could be outweighed by other 
benefits to retaining the measure. Therefore, because of the continued 
need to balance benefits and drawbacks as well as our desire to 
increase transparency, we are proposing additional factors to consider 
for measure removal and also include factors to consider in order to 
retain measures.
    Specifically, we are proposing to take into consideration the 
following additional factors in determining whether a measure should be 
removed:
     Feasibility to implement the measure specifications.
    In addition, we are proposing to remove one of the factors 
(``Availability of alternative measures with a stronger relationship to 
patient outcomes'') we take into consideration when determining whether 
to remove measures, because it is duplicates another factor (``The 
availability of a measure that is more strongly associated with desired 
patient outcomes for the particular topic'').
    We are also proposing to take into consideration the following 
factors in determining whether a measure should be retained:
     Measure aligns with National Quality Strategy or CMS 
Quality Strategy goals;
     Measure aligns with other CMS programs, including other 
quality reporting programs, or the EHR Incentive Program; and
     Measure supports efforts to move facilities towards 
reporting electronic measures
    For example, we may consider retaining a measure that is 
statistically ``topped-out'' in order to align with the Medicare EHR 
Incentive Program. Below is a table of newly proposed and previously 
adopted factors that we would take into consideration in removing or 
retaining measures:

         Factors CMS Considers in Removing or Retaining Measures
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                         Measure Removal Factors
------------------------------------------------------------------------
1. Measure performance among hospitals is so high and unvarying that
 meaningful distinctions and improvements in performance can no longer
 be made (``topped-out'' measures).
2. A measure does not align with current clinical guidelines or
 practice.
3. The availability of a more broadly applicable measure (across
 settings, populations, or the availability of a measure that is more
 proximal in time to desired patient outcomes for the particular topic).
4. Performance or improvement on a measure does not result in better
 patient outcomes.
5. The availability of a measure that is more strongly associated with
 desired patient outcomes for the particular topic.
6. Collection or public reporting of a measure leads to negative
 unintended consequences other than patient harm.
7. It is not feasible to implement the measure specifications *.
------------------------------------------------------------------------

[[Page 24557]]

 
                         ``Topped-Out'' Criteria
------------------------------------------------------------------------
1. Statistically indistinguishable performance at the 75th and
 90th percentiles; and
  Truncated coefficient of variation <=0.10.
------------------------------------------------------------------------
                        Measure Retention Factors
------------------------------------------------------------------------
1. Measure aligns with other CMS and HHS policy goals.*
2. Measure aligns with other CMS programs, including other quality
 reporting programs, or the EHR Incentive Program.
3. Measure supports efforts to move facilities towards reporting
 electronic measures.
------------------------------------------------------------------------
* Consideration proposed in this FY 2016 IPPS/LTCH PPS proposed rule.

    We note that these removal/retention factors continue to be 
considerations taken into account when deciding whether or not to 
remove measures; but they are not firm requirements.
    We are inviting public comments on our proposal.
b. Proposed Removal of Hospital IQR Program Measures for the FY 2018 
Payment Determination and Subsequent Years
    We are proposing to remove the following nine measures, either in 
their entirety or just the chart-abstracted form, from the Hospital IQR 
Program measure set for the FY 2018 payment determination and 
subsequent years: STK-01: Venous Thromboembolism (VTE) Prophylaxis (NQF 
#0434), STK-06: Discharged on Statin Medication (NQF #0439), STK-08: 
Stroke Education (NQF endorsement removed), VTE-1: Venous 
Thromboembolism Prophylaxis (NQF #0371), VTE-2: Intensive Care Unit 
Venous Thromboembolism Prophylaxis (NQF #0372), VTE-3: Venous 
Thromboembolism Patients with Anticoagulation Overlap Therapy (NQF 
#0373), IMM-1: Pneumococcal Immunization (NQF #1653), AMI-7a: 
Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival 
(NQF #0164), and SCIP-Inf-4: Cardiac Surgery Patients with Controlled 
Postoperative Blood Glucose (NQF #0300).
(1) STK-01, STK-06, STK-08, VTE-1, VTE-2, and VTE-3
    We are proposing to remove the chart-abstracted versions of STK-01, 
STK-06, STK-08, VTE-1, VTE-2, and VTE-3 because these measures are 
``topped-out.'' However, we are proposing to retain STK-06, STK-08, 
VTE-1, VTE-2, and VTE-3 as electronic clinical quality measures for the 
FY 2018 payment determination and subsequent years. As we state above 
in section VIII.A.3.a. of the preamble of this proposed rule, in our 
discussion of factors we consider in removing or retaining a measure, 
``topped-out'' status is only one of many factors which we consider.
    In balancing the benefits and disadvantages of removing or 
retaining a measure, we believe that the benefits of retaining the 
electronic versions of these measures outweigh the possible 
disadvantages. Specifically, we believe that while these measures are 
statistically ``topped-out,'' retaining the electronic versions of the 
measures is beneficial because they align the Hospital IQR Program with 
the Medicare EHR Incentive Program. In addition, retaining the 
electronic version of the measures would allow us to monitor the 
effectiveness of measure reporting by EHRs and help to familiarize 
hospitals with reporting electronically specified measures to CMS under 
the Hospital IQR Program.
    Our data show that the electronically specified versions of these 
measures are reported with non-zero values by as many as 2,864 
hospitals attesting under 2014 Meaningful Use and that hospitals report 
on the full range of available electronic clinical quality measures, 
indicating the value of variety. Accordingly, we know that EHRs are 
certified to these measures, and that hospitals do indeed report them. 
The available data suggest that retaining STK-06, STK-08, VTE-1, VTE-2, 
and VTE-3 as electronic clinical quality measures furthers CMS' high 
priority goal to enable the electronic reporting of quality data and to 
align the Hospital IQR and EHR Incentive Programs.
    We also believe that reporting electronic clinical quality measures 
presents minimal burden on hospitals as compared to their chart-
abstracted equivalents and that retaining the electronically specified 
versions of these measures is appropriate until we fully understand the 
differences between the chart-abstracted and electronic versions of 
quality measures. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50808) 
we stated that we do not believe that the measures, in their 
electronically specified form, are substantively different than their 
chart-abstracted form, although we recognized that the EHR-based 
extraction methodology is different from the chart-abstraction data 
collection methodology.
    However, CMS now recognizes that although the intent of a measure 
is the same whether it is reported via chart-abstraction or 
electronically, the submission modes are not the same and measure rates 
may be different.
    As described in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50258), 
we have only heard anecdotal comments about actual performance level 
differences between the two modes of collection. We do not have 
sufficient data to be able to confirm these comments, but in the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50273), we finalized a proposal to 
conduct a validation pilot test for electronically specified measures, 
which we intend to complete in 2015. Therefore, the results of this 
pilot are not yet available. As we have stated in the FY 2013 IPPS/LTCH 
PPS final rule (77 FR 53555), determining the equivalence of electronic 
clinical quality measures and chart-abstracted measures would require 
extensive testing given that the data for the Hospital IQR Program 
supports public reporting for both the Hospital IQR and Hospital VBP 
Programs. Due to the reasons described above, we believe it is 
appropriate to retain the electronically specified version of these 6 
measures at this time.
    We are inviting public comment on our proposals.
(2) IMM-2 Influenza Immunization (NQF #1659)
    One additional measure, IMM-2, has been determined to be 
statistically ``topped-out;'' however, after considering the benefits 
and disadvantages of removing or retaining this measure, we are 
retaining this measure in the Hospital IQR Program measure set for the 
FY 2018 payment determination and subsequent years, because the 
benefits outweigh the disadvantages. One of the factors that we 
consider when determining whether to remove or retain a measure is 
whether a measure aligns with National Quality Strategy (NQS) or CMS 
Quality

[[Page 24558]]

Strategy goals. Currently, IMM-2 is the only Hospital IQR Program 
measure to address the Best Practices to Enable Healthy Living NQS 
Priority and CMS Quality Strategy goal. In addition, IMM-2 supports the 
NQS priorities and CMS Quality Strategy goals to promote effective 
interventions to prevent and reduce the leading causes of 
mortality.\79\
---------------------------------------------------------------------------

    \79\ The Centers for Disease Control and Prevention: Key Facts 
About Seasonal Flu Vaccine. Retrieved from: http://www.cdc.gov/flu/protect/keyfacts.htm.
---------------------------------------------------------------------------

(3) Removal of Immunization 1 (IMM-1) Pneumococcal Immunization (NQF 
#1653)
    We adopted the IMM-1 Pneumococcal Immunization measure (NQF #1653) 
for the FY 2014 payment determination and subsequent years with data 
collection beginning with January 1, 2012 discharges (75 FR 50211). In 
October 2012, subsequent to the beginning of IMM-1 data collection on 
January 1, 2012, the Advisory Committee on Immunization Practices 
(ACIP) published new guidelines on pneumococcal vaccination.\80\ With 
the publication of the new ACIP guidelines, IMM-1, as specified in the 
Hospital IQR Program, was no longer compliant with current clinical 
guidelines.
---------------------------------------------------------------------------

    \80\ MMWR October 12, 2012. Available at http://www.cdc.gov/mmwr/PDF/wk/mm6140.pdf. Accessed on October 31, 2012.
---------------------------------------------------------------------------

    As part of our efforts to re-specify IMM-1 to account for the many 
potential scenarios that must be considered when determining if 
pneumococcal vaccination is appropriate, we determined that it was not 
feasible to implement the measure specifications that incorporated the 
new guidelines given their complexity.
    Specifically, the October 2012 ACIP guidelines recommended the 
routine use of 13-valent pneumococcal conjugate (PCV13) vaccine for 
adults aged >=19 years with certain comorbid conditions, and that PCV13 
should be administered to eligible adults in addition to the 23-valent 
pneumococcal polysaccharide vaccine (PPSV23) that was currently 
recommended for these groups of adults. The timing of vaccination with 
PCV13 and PPSV23 is dependent upon if and when an individual has 
received the other vaccine.
    In order to implement the measure consistent with these new 
guidelines, providers would need reliable, detailed data on: (1) 
Whether or not a pneumococcal vaccine was previously administered, (2) 
which type of pneumococcal vaccine (PCV13 vs. PPSV23) was administered, 
and (3) when it was administered. When considering possible clinical 
scenarios of screening and vaccinating for pneumonia, current chart and 
electronic data do not consistently allow for successful abstraction of 
these varied and detailed historical facts, all of which are needed to 
appropriately administer a pneumococcal vaccine.
    We believe that the measure, as updated by ACIP guidelines, would 
burden hospitals with data abstraction and yield results with only 
questionable meaningfulness and reliability. We outlined these 
pneumococcal vaccination implementation issues in the FY 2014 IPPS/LTCH 
PPS final rule (78 FR 50780 through 50781), and suspended data 
collection for IMM-1 until further notice.
    Since the suspension of IMM-1, ACIP again updated its 2012 
guidelines in September 2014.\81\ In reviewing the updated 2014 
guidelines, we held discussions with other HHS agencies to identify 
implementation strategies for these updated guidelines. However, we 
were still unable to identify a consistent data source, such as a 
national immunization registry, that is available to hospitals which 
would provide sufficient patient-level clinical information to ensure 
that hospitals would be able to accurately and reliably determine 
whether they were following the guidelines. There continues to be a 
lack of detailed and reliable patient level data on prior pneumococcal 
vaccination that is readily available to all hospitals. Without 
detailed, reliable, and readily available data for hospitals, it will 
be difficult to determine if the pneumococcal vaccinations are 
appropriately administered.
---------------------------------------------------------------------------

    \81\ MMWR September 2014. Available at http://www.cdc.gov/mmwr/pdf/wk/mm6337.pdf.
---------------------------------------------------------------------------

    In determining whether to remove the IMM-1 measure, we considered 
the factors stated above in section VIII.A.3.a. of the preamble of this 
proposed rule, in our discussion of considerations for the removal and 
retention of quality measures from the Hospital IQR Program. Based on 
the continued lack of ready access to comprehensive patient-level 
immunization data by hospital staff and the continued infeasibility to 
implement or align this measure with current clinical guidelines or 
practice, we are proposing to remove this measure from the Hospital IQR 
Program. We emphasize that, despite the proposed removal of the IMM-1 
measure from the Hospital IQR Program, we understand and value the role 
pneumococcal vaccines play in preventing pneumococcal disease \82\ and 
we expect hospitals to continue to provide pneumococcal vaccinations 
for their hospital populations as appropriate.
---------------------------------------------------------------------------

    \82\ CDC: Pneumococcal Disease. Retrieved from: http://www.cdc.gov/pneumococcal/about/prevention.html.
---------------------------------------------------------------------------

    We are inviting public comments on this proposal to remove IMM-1 
from the Hospital IQR Program beginning in CY 2016 for the FY 2018 
payment determination and subsequent years.
(4) Removal of AMI-7a Fibrinolytic Therapy Received Within 30 Minutes 
of Hospital Arrival Measure (NQF #0164)
    Our evaluation of the most recently available data shows that AMI-
7a is not widely reported by hospitals, and according to the most 
recent data available, hospitals reporting this measure have less than 
the required number of cases to be publicly reported. In determining 
whether to remove AMI-7a as a chart-abstracted measure, we considered 
the factors stated in section VIII.A.3.a. of the preamble of this 
proposed rule in our discussion of considerations for the removal and 
retention of quality measures from the Hospital IQR Program. We are 
proposing to remove AMI-7a as a chart-abstracted measure beginning in 
CY 2016 for the FY 2018 payment determination and subsequent years 
because performance on this measure does not result in better patient 
outcomes. Specifically, measure data are infrequently reported, as most 
acute myocardial infarction patients receive percutaneous coronary 
intervention instead of fibrinolytic therapy. In addition, we believe 
that the burden of requiring all hospitals to report data on this 
measure, when only a minority of facilities report enough cases to be 
publicly reported, outweighs the benefits of retaining the chart-
abstracted version of this measure.
    However, we are proposing to retain AMI-7a as an electronic 
clinical quality measure. We believe that once electronic capture of 
the measure is possible, the time and resources for electronic 
reporting should be significantly less as compared to manual 
abstraction. In addition, as discussed in section VIII.A.3.a. of the 
preamble of this proposed rule, retaining the electronically specified 
version of a measure allows us to support the alignment of the Hospital 
IQR Program and the Medicare EHR Incentive Program. In addition, 
retaining this measure will both allow us to monitor the effectiveness 
of measure reporting by EHRs and help familiarize hospitals with 
reporting electronically specified

[[Page 24559]]

measures under the Hospital IQR Program.
    We are inviting public comments on our proposal to remove the 
chart-abstracted version of AMI-7a but retain the electronic version 
for the CY 2016/FY 2018 payment determination and subsequent years.
(5) Removal of SCIP-Inf-4 Cardiac Surgery Patients With Controlled 
Postoperative Blood Glucose (NQF #0300)
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66876), we finalized SCIP-Inf-4 Cardiac Surgery Patients with 
Controlled Postoperative Blood Glucose (NQF #0300) for the Hospital IQR 
Program for FY 2009 and subsequent years. We also stated that hospitals 
were required to begin submitting data for SCIP-Inf-4 beginning with 
January 1, 2008 discharges.
    Since the finalization of SCIP-Inf-4 for the Hospital IQR Program, 
the measure underwent routine NQF maintenance endorsement proceedings 
in 2012. During the NQF maintenance proceedings, the NQF Steering 
Committee discussed and recommended that the measure assess a lower 
blood glucose level target and lengthen the timeframe for achieving the 
lower blood glucose level target. As part of the maintenance 
endorsement renewal process, SCIP-Inf-4 was modified with the goal of 
achieving post-operative blood glucose levels of 180 mg/dl at 18-24 
hours after surgery (previously, the timeframe was to achieve 200 mg/dl 
by 6 a.m. on post-operative days 1 and 2). We finalized the adoption of 
these measure refinements (see revised measure specifications at http://www.qualityforum.org/QPS/0300), in the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50788) with data collection beginning with January 1, 2014 
discharges. We also stated then that we would consider whether 
additional refinements should be made to better define the 18-24 hour 
timeframe for the measure.
    Since finalizing the refinements to SCIP-Inf-4, we have been 
contacted by stakeholders and experts in the field of endocrinology 
regarding the newly refined goal of 180 mg/dl within an 18-24 hour 
timeframe. Specifically, there are concerns about the following aspects 
of the measure: (1) Defining ``optimal glycemic control;'' (2) 
measuring the correlation between optimal glycemic goals and better 
outcomes; \83\ and (3) using an arbitrary 18-24 hour timeframe that 
does not cover a physiologically meaningful period of time.
---------------------------------------------------------------------------

    \83\ Optimal glycemic research for 6 a.m. blood glucose control 
shows a weak correlation between optimal glycemic goals and better 
outcomes related to morbidity, mortality and length of stay, 
suggesting that this type of metric may not be valid. LaPar FJ, 
Isbell JM, Kern JA, Ailawadi G, Kron IL. Surgical Care Improvement 
Project measure for postoperative glucose control should not be used 
as a measure of quality after cardiac surgery. J Thorac Cardiovasc 
Surg 2014;147:1041-8.
---------------------------------------------------------------------------

    Experts in the endocrinology field have shared that providers' 
enthusiasm to meet the measure blood glucose goals in the specified 
timeframe may lead to the following unintended consequences: (1) 
Providers delaying patients' meals until the 24-hour timeframe has 
passed; (2) providers keeping diabetic patients in intensive care units 
on insulin drips until the 24-hour timeframe has passed; (3) providers 
ensuring patients' postprandial glucose levels are kept below 180 mg/dl 
by concurrent use of intravenous and subcutaneous insulin 
administration; and (4) undetected hypoglycemic events caused by using 
multiple forms of insulin administration since the measure does not 
assess blood glucose levels past 24 hours. Multiple stakeholders also 
indicate that the Society of Thoracic Surgeons' guidelines \84\ on 
preoperative through postoperative cardiac surgery glucose control, 
which helped inform CMS in maintenance of this measure, are currently 
being reviewed. Newer guidelines will address methods to monitor 
glycemic control in the post-cardiac surgical patient population. 
However, these guidelines are not currently available to guide further 
refinements of SCIP-Inf-4.
---------------------------------------------------------------------------

    \84\ Lazar HL, McDonnell M, Chipkin SR, Furnary AP, Engelman RM, 
Sadhu AR et al. The Society of Thoracic Surgeons Practice Guideline 
Series: Blood Glucose Management During Adult Cardiac Surgery. Ann 
Thorac Surg 2009; 87: 663-9.
---------------------------------------------------------------------------

    In view of stakeholder concerns, the seriousness of the potential 
negative unintended consequences, and recent analysis that shows the 
refined measure is ``topped-out,'' on January 9, 2015 we formally 
suspended the collection of data for SCIP-Inf-4 beginning with July 1, 
2014 discharges. We refer readers to https://www.qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228890406532&blobheader=multipart%2Foctet-stream&blobheadername1=Content-Disposition&blobheadervalue1=attachment%3Bfilename%3D2015-02-IP.pdf&blobcol=urldata&blobtable=MungoBlobs for more information about 
the suspension.
    In this proposed rule, we are proposing to remove SCIP-Inf-4 from 
the Hospital IQR Program effective beginning with CY 2016 discharges 
for the FY 2018 payment determination and subsequent years. We believe 
removal of this measure, rather than continued suspension, is 
appropriate for several reasons. First, performance on this measure 
does not result in better patient outcomes. Recent literature has 
highlighted that not meeting optimal glycemic control for a narrow 
point in time does not result in poorer outcomes.\85\ Second, the 
measure does not align with current clinical guidelines or 
practice.\86\ As previously stated, stakeholders and experts in the 
field of endocrinology have voiced their concerns in these areas, 
especially with using an arbitrary 18-24 hour timeframe that does not 
cover a physiologically meaningful period of time, as current practice 
guidelines aim for overall glycemic control.\87\ Third, public 
reporting of a measure leads to negative unintended consequences other 
than patient harm. As mentioned above, these negative unintended 
consequences include potentially delaying patient meals or transition 
from the intensive care unit while keeping patients on insulin drips. 
For more information on the factors we consider for removing or 
retaining quality measures, we refer readers to the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50203 through 50204) and section VIII.A.3.a. of 
the preamble of this proposed rule. The measure will remain suspended 
until CY 2016 discharges begin. Despite our proposed removal of SCIP-
Inf-4, we continue to believe glycemic control is important, and we 
hope to include measures focusing on glycemic control in the Hospital 
IQR Program in the near future.
---------------------------------------------------------------------------

    \85\ LaPar FJ, Isbell JM, Kern JA, Ailawadi G, Kron IL. Surgical 
Care Improvement Project measure for postoperative glucose control 
should not be used as a measure of quality after cardiac surgery. J 
Thorac Cardiovasc Surg 2014;147:1041-8.
    \86\ Harold L. Lazar HL, McDonnell ME, Chipkin SR, Furnary AP, 
Engelman RM, Sadhu AR, Bridges CR and Haan CK. The Society of 
Thoracic Surgeons Practice Guideline Series: Blood Glucose 
Management During Adult Cardiac Surgery. Ann Thorac Surg 
2009;87:663-9.
    \87\ Harold L. Lazar HL, McDonnell ME, Chipkin SR, Furnary AP, 
Engelman RM, Sadhu AR, Bridges CR and Haan CK. The Society of 
Thoracic Surgeons Practice Guideline Series: Blood Glucose 
Management During Adult Cardiac Surgery. Ann Thorac Surg 
2009;87:663-9.
---------------------------------------------------------------------------

    We are inviting public comments on our proposal to remove SCIP-Inf-
4 from the Hospital IQR Program for the FY 2018 payment determination 
and subsequent years.
    The table below lists the measures we are proposing for removal for 
the FY 2018 payment determination and subsequent years.

[[Page 24560]]



 Measures Proposed for Removal for the FY 2018 Payment Determination and
                            Subsequent Years
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
                         ``Topped-out'' Measures
------------------------------------------------------------------------
 STK-01: Venous Thromboembolism (VTE) Prophylaxis (NQF #0434)
 STK-06: Discharged on Statin Medication * (NQF #0439)
 STK-08: Stroke Education * (NQF endorsement removed)
 VTE-1: Venous Thromboembolism Prophylaxis * (NQF #0371)
 VTE-2: Intensive Care Unit Venous Thromboembolism Prophylaxis *
 (NQF #0372)
 VTE-3: Venous Thromboembolism Patients with Anticoagulation
 Overlap Therapy * (NQF #0373)
------------------------------------------------------------------------
                   Other Measures Proposed for Removal
------------------------------------------------------------------------
 IMM-1 Pneumococcal Immunization (NQF #1653)
 SCIP-Inf-4 Cardiac Surgery Patients with Controlled
 Postoperative Blood Glucose (NQF #0300)
 AMI-7a Fibrinolytic Therapy Received Within 30 Minutes of
 Hospital Arrival * (NQF #0164)
------------------------------------------------------------------------
 * Proposed for retention as electronic clinical quality measures for
  the Hospital IQR Program FY 2018 payment determination and subsequent
  years.

    We are inviting public comment on our proposals.
4. Previously Adopted Hospital IQR Program Measures for the FY 2017 
Payment Determination and Subsequent Years
a. Background
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50246), we described 
that the Hospital IQR Program measure set for the FY 2017 payment 
determination and subsequent years includes a total of 63 measures:

 6 NHSN measures
 28 electronic clinical quality measures (voluntary; 11 of 
these have the option of being reported as chart-abstracted measures)
 15 chart-abstracted measures (11 of these have the option of 
being reported as electronic clinical quality measures)
 21 claims-based measures
 1 survey measure
 3 structural measures

    In the FY 2015 IPPS/LTCH PPS final rule, we described that of the 
63 measures making up the Hospital IQR Program measure set for the FY 
2017 payment determination and subsequent years, 42 were previously 
finalized measures, 11 were measures newly adopted in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 49865) and 10 were measures that were 
determined to be ``topped-out'' but were retained in the Hospital IQR 
Program as voluntary electronic clinical quality measures (79 FR 
50208).
    The following table shows measures previously adopted for the 
Hospital IQR Program FY 2017 payment determination and subsequent 
years. For a detailed list of the Hospital IQR Program FY 2018 payment 
determination and subsequent years measure set, we refer readers to 
section VIII.A.7.f. of the preamble of this proposed rule.

Previously Adopted Hospital IQR Program Measures for the FY 2017 Payment
                   Determination and Subsequent Years
------------------------------------------------------------------------
          Short name                    Measure name            NQF No.
------------------------------------------------------------------------
                                  NHSN
------------------------------------------------------------------------
CLABSI.......................  National Healthcare Safety           0139
                                Network (NHSN) Central Line-
                                Associated Bloodstream
                                Infection (CLABSI) Outcome
                                Measure.
Colon and Abdominal            American College of Surgeons--       0753
 Hysterectomy SSI.              Centers for Disease Control
                                and Prevention (ACS-CDC)
                                Harmonized Procedure Specific
                                Surgical Site Infection (SSI)
                                Outcome Measure.
CAUTI........................  National Healthcare Safety           0138
                                Network (NHSN) Catheter-
                                associated Urinary Tract
                                Infection (CAUTI) Outcome
                                Measure.
MRSA Bacteremia..............  National Healthcare Safety           1716
                                Network (NHSN) Facility-wide
                                Inpatient Hospital-onset
                                Methicillin-resistant
                                Staphylococcus aureus (MRSA)
                                Bacteremia Outcome Measure.
CDI..........................  National Healthcare Safety           1717
                                Network (NHSN) Facility-wide
                                Inpatient Hospital-onset
                                Clostridium difficile
                                Infection (CDI) Outcome
                                Measure.
HCP..........................  Influenza Vaccination Coverage       0431
                                Among Healthcare Personnel.
------------------------------------------------------------------------
                            Chart-abstracted
------------------------------------------------------------------------
AMI-7a *.....................  Fibrinolytic Therapy Received        0164
                                Within 30 Minutes of Hospital
                                Arrival.
ED-1 *.......................  Median Time from ED Arrival to       0495
                                ED Departure for patients
                                Admitted ED Patients.
ED-2 *.......................  Admit Decision Time to ED            0497
                                Departure Time for Admitted
                                Patients.
Imm-2........................  Influenza Immunization........       1659
PC-01 *......................  Elective Delivery (Collected         0469
                                in aggregate, submitted via
                                Web-based tool or electronic
                                clinical quality measure).
SCIP-Inf-4...................  Cardiac Surgery Patients with        0300
                                Controlled Postoperative
                                Blood Glucose.
Sepsis.......................  Severe Sepsis and Septic             0500
                                Shock: Management Bundle
                                (Composite Measure).
STK-01.......................  Venous Thromboembolism (VTE)         0434
                                Prophylaxis.
STK-04 *.....................  Thrombolytic Therapy..........       0437
STK-06 *.....................  Discharged on Statin                 0439
                                Medication.
STK-08 *.....................  Stroke Education..............        N/A
VTE-1 *......................  Venous Thromboembolism               0371
                                Prophylaxis.
VTE-2 *......................  Intensive Care Unit Venous           0372
                                Thromboembolism Prophylaxis.

[[Page 24561]]

 
VTE-5 *......................  Venous Thromboembolism                N/A
                                Discharge Instructions.
VTE-6 *......................  Incidence of Potentially              N/A
                                Preventable Venous
                                Thromboembolism.
------------------------------------------------------------------------
                                 Claims
------------------------------------------------------------------------
MORT-30-AMI..................  Hospital 30-Day, All-Cause,          0230
                                Risk-Standardized Mortality
                                Rate (RSMR) Following Acute
                                Myocardial Infarction (AMI)
                                Hospitalization for Patients
                                18 and Older.
MORT-30-HF...................  Hospital 30-Day, All-Cause,          0229
                                Risk-Standardized Mortality
                                Rate (RSMR) Following Heart
                                Failure (HF) Hospitalization
                                for Patients 18 and Older.
MORT-30-PN...................  Hospital 30-Day, All-Cause,          0468
                                Risk-Standardized Mortality
                                Rate (RSMR) Following
                                Pneumonia Hospitalization.
MORT-30-COPD.................  Hospital 30-Day, All-Cause,          1893
                                Risk-Standardized Mortality
                                Rate (RSMR) Following Chronic
                                Obstructive Pulmonary Disease
                                (COPD) Hospitalization.
STK Mortality................  Stroke 30-day Mortality Rate..        N/A
CABG Mortality...............  Hospital 30-Day, All-Cause,          2558
                                Risk-Standardized Mortality
                                Rate (RSMR) Following
                                Coronary Artery Bypass Graft
                                (CABG) Surgery.
READM-30-AMI.................  Hospital 30-Day All-Cause Risk-      0505
                                Standardized Readmission Rate
                                (RSRR) Following Acute
                                Myocardial Infarction (AMI)
                                Hospitalization.
READM-30-HF..................  Hospital 30-Day, All-Cause,          0330
                                Risk-Standardized Readmission
                                Rate (RSRR) Following Heart
                                Failure (HF) Hospitalization.
READM-30-PN..................  Hospital 30-Day, All-Cause,          0506
                                Risk-Standardized Readmission
                                Rate (RSRR) Following
                                Pneumonia Hospitalization.
READM-30-THA/TKA.............  Hospital-Level 30-Day, All-          1551
                                Cause Risk-Standardized
                                Readmission Rate (RSRR)
                                Following Elective Primary
                                Total Hip Arthroplasty (THA)
                                and/or Total Knee
                                Arthroplasty (TKA).
READM-30-HWR.................  Hospital-Wide All-Cause              1789
                                Unplanned Readmission Measure
                                (HWR).
COPD READMIT.................  Hospital 30-Day, All-Cause,          1891
                                Risk-Standardized Readmission
                                Rate (RSRR) Following Chronic
                                Obstructive Pulmonary Disease
                                (COPD) Hospitalization.
STK READMIT..................  30-Day Risk Standardized              N/A
                                Readmission Rate Following
                                Stroke Hospitalization.
CABG READMIT.................  Hospital 30-Day, All-Cause,          2515
                                Unplanned, Risk-Standardized
                                Readmission Rate (RSRR)
                                Following Coronary Artery
                                Bypass Graft (CABG) Surgery.
MSPB.........................  Payment-Standardized Medicare        2158
                                Spending Per Beneficiary
                                (MSPB).
AMI payment..................  Hospital-Level, Risk-                2431
                                Standardized Payment
                                Associated with a 30-Day
                                Episode-of-Care for Acute
                                Myocardial Infarction (AMI).
HF Payment...................  Hospital-Level, Risk-                2436
                                Standardized Payment
                                Associated with a 30-Day
                                Episode-of-Care For Heart
                                Failure (HF).
PN Payment...................  Hospital-Level, Risk-                2579
                                Standardized Payment
                                Associated with a 30-day
                                Episode-of-Care For Pneumonia.
Hip/knee complications.......  Hospital-Level Risk-                 1550
                                Standardized Complication
                                Rate (RSCR) Following
                                Elective Primary Total Hip
                                Arthroplasty (THA) and/or
                                Total Knee Arthroplasty (TKA).
PSI 4 (PSI/NSI)..............  Death among Surgical                 0351
                                Inpatients with Serious,
                                Treatable Complications.
PSI 90.......................  Patient Safety for Selected          0531
                                Indicators (Composite
                                Measure).
------------------------------------------------------------------------
                  Electronic Clinical Quality Measures
------------------------------------------------------------------------
AMI-2........................  Aspirin Prescribed at                0142
                                Discharge for AMI.
AMI-7a *.....................  Fibrinolytic Therapy Received        0164
                                Within 30 Minutes of Hospital
                                Arrival.
AMI-8a.......................  Primary PCI Received Within 90       0163
                                Minutes of Hospital Arrival.
AMI-10.......................  Statin Prescribed at Discharge        N/A
CAC-3........................  Home Management Plan of Care          N/A
                                Document Given to Patient/
                                Caregiver.
EHDI-1a......................  Hearing Screening Prior to           1354
                                Hospital Discharge.
ED-1 *.......................  Median Time from ED Arrival to       0495
                                ED Departure for Admitted ED
                                Patients.
ED-2 *.......................  Admit Decision Time to ED            0497
                                Departure Time for Admitted
                                Patients.
HTN..........................  Healthy Term Newborn..........       0716
PC-01 *......................  Elective Delivery (Collected         0469
                                in aggregate, submitted via
                                Web-based tool or electronic
                                clinical quality measure).
PC-05........................  Exclusive Breast Milk Feeding        0480
                                and the Subset Measure PC-05a
                                Exclusive Breast Milk Feeding
                                Considering Mother[acute]s
                                Choice.
PN-6.........................  Initial Antibiotic Selection         0147
                                for Community[dash]Acquired
                                Pneumonia (CAP) in
                                Immunocompetent Patients.
SCIP-Inf-1a..................  Prophylactic Antibiotic              0527
                                Received Within One Hour
                                Prior to Surgical Incision.
SCIP-Inf-2a..................  Prophylactic Antibiotic              0528
                                Selection for Surgical
                                Patients.
SCIP-Inf-9...................  Urinary Catheter Removed on           N/A
                                Postoperative Day 1 (POD 1)
                                or Postoperative Day 2 (POD
                                2) with Day of Surgery Being
                                Day Zero.
STK-02.......................  Discharged on Antithrombotic         0435
                                Therapy.
STK-03.......................  Anticoagulation Therapy for          0436
                                Atrial Fibrillation/Flutter.
STK-04 *.....................  Thrombolytic Therapy..........       0437
STK-05.......................  Antithrombotic Therapy by the        0438
                                End of Hospital Day Two.
STK-06 *.....................  Discharged on Statin                 0439
                                Medication.
STK-08 *.....................  Stroke Education..............        N/A
STK-10.......................  Assessed for Rehabilitation...       0441
VTE-1 *......................  Venous Thromboembolism               0371
                                Prophylaxis.

[[Page 24562]]

 
VTE-2 *......................  Intensive Care Unit Venous           0372
                                Thromboembolism Prophylaxis.
VTE-3........................  Venous Thromboembolism               0373
                                Patients with Anticoagulation
                                Overlap Therapy.
VTE-4........................  Venous Thromboembolism                N/A
                                Patients Receiving
                                Unfractionated Heparin with
                                Dosages/Platelet Count
                                Monitoring by Protocol or
                                Nomogram.
VTE-5 *......................  Venous Thromboembolism                N/A
                                Discharge Instructions.
VTE-6 *......................  Incidence of Potentially              N/A
                                Preventable Venous
                                Thromboembolism.
------------------------------------------------------------------------
                             Patient Survey
------------------------------------------------------------------------
HCAHPS.......................  HCAHPS + 3-Item Care                 0166
                                Transition Measure (CTM-3).         0228
------------------------------------------------------------------------
                               Structural
------------------------------------------------------------------------
Registry for Nursing           Participation in a Systematic         N/A
 Sensitive Care.                Clinical Database Registry
                                for Nursing Sensitive Care.
Registry for General Surgery.  Participation in a Systematic         N/A
                                Clinical Database Registry
                                for General Surgery.
Safe Surgery Checklist.......  Safe Surgery Checklist Use....        N/A
------------------------------------------------------------------------
* Measure is listed twice, as both chart-abstracted and electronic
  clinical quality measure.

b. NHSN Measures Standard Population Data
    The previously adopted NHSN measures include the CAUTI, CLABSI, 
MRSA Bacteremia, CDI, colon and abdominal hysterectomy SSI measures, 
and HCP for the FY 2017 payment determination and subsequent years. We 
refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50200 
through 50202) and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51616 
through 51618; 76 FR 51629 through 51633) for more information about 
these measures. These NHSN measures measure the incidence of HAIs in 
hospitals participating in the Hospital IQR Program. In order to 
calculate the NHSN measures for use in the Hospital IQR Program, CDC 
must go through several steps.
    First, CDC determines each NHSN measure's number of predicted 
infections. CDC determines this number using both specific hospital 
characteristics (for example, number of central line days for CLABSI) 
and infection rates that occurred among a standard population 
(sometimes referred to by CDC as ``national baseline'' but referred to 
here as ``standard population data''). CDC currently uses data it 
collected in calendar year (CY) 2009 for the CAUTI measure's standard 
population data.
    In addition, for each NHSN measure, CDC calculates the Standardized 
Infection Ratio (SIR) by comparing a hospital's reported number of HAIs 
with the standard population data. For more information about the way 
NHSN measures are calculated, please refer to the QualityNet Web page 
on HAI measures at: https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228760487021.
    We would like to notify the public that CDC will update the 
standard population data to ensure the NHSN measures' number of 
predicted infections reflect the current state of HAIs in the United 
States. The standard referent population that CDC uses to calculate the 
Standardized Infection Ratios (SIRs) is comprised of healthcare-
associated infection data that CDC's NHSN collects from healthcare 
facilities throughout the United States for infection events that 
occurred in a specified baseline time period. Beginning in CY 2016, CDC 
will use data collected for infection events that occurred in 2015 as 
the new standard referent population. To do so, CDC will collect HAI 
data that healthcare facilities are reporting for events that have or 
will occur in CY 2015 to use in updating the standard population data 
for HAI measures. This new CY 2015 standard population data for HAI 
measures will hereinafter be referred to as ``new standard population 
data.''
    While this is not a Hospital IQR Program proposal, we are still 
inviting public input on the CDC's plans to update the standard 
population data for HAI measures.
5. Expansion and Updating of Quality Measures
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53510 through 53512) for a discussion of the considerations we use to 
expand and update quality measures under the Hospital IQR Program. We 
are not proposing any changes to these considerations.
6. Proposed Refinements to Existing Measures in the Hospital IQR 
Program
    We are proposing refinements to the measure cohorts for: (1) The 
Hospital 30-day, All-cause, Risk-Standardized Mortality Rate (RSMR) 
following Pneumonia Hospitalization (NQF #0468) measure; and (2) the 
Hospital 30-day, All-cause, Risk-Standardized Readmission Rate 
following Pneumonia Hospitalization (NQF #0506) measure. The proposed 
refined measures were included on a publicly available document 
entitled ``List of Measures Under Consideration for December 1, 2014'' 
in compliance with section 1890A(a)(2) of the Act, and they were 
reviewed by the MAP as discussed in its MAP Pre-Rulemaking Report.\88\ 
These measure refinements are discussed in greater detail below.
---------------------------------------------------------------------------

    \88\ National Quality Forum ``Process and Approach for MAP Pre-
Rulemaking Deliberations 2015'' found at: http://www.qualityforum.org/Publications/2015/01/Process_and_Approach_for_MAP_Pre-Rulemaking_Deliberations_2015.aspx 
and ``Spreadsheet of MAP 2015 Final Recommendations'' available at: 
http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

a. Proposed Refinement of Hospital 30-Day, All-Cause, Risk-Standardized 
Mortality Rate (RSMR) Following Pneumonia Hospitalization (NQF #0468) 
Measure Cohort
(1) Background
    We are proposing a refinement to the previously adopted Hospital 
30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following 
Pneumonia Hospitalization (NQF #0468) measure (hereinafter referred to 
as the CMS 30-

[[Page 24563]]

day Pneumonia Mortality Measure), which expands the measure cohort. For 
the purposes of describing the refinement of this measure, we note that 
``cohort'' is defined as the hospitalizations, or ``index admissions,'' 
that are included in the measure and evaluated to ascertain whether the 
patient subsequently died within 30 days of the index admission. This 
cohort is the set of hospitalizations that meet all of the inclusion 
and exclusion criteria, and we are proposing an expansion to this set 
of hospitalizations.
    The previously adopted CMS 30-day Pneumonia Mortality Measure (72 
FR 47351) includes hospitalizations for patients with a principal 
discharge diagnosis of pneumonia indicating viral or bacterial 
pneumonia. For more cohort details on the measure as currently 
implemented, we refer readers to the measure methodology report and 
measure risk adjustment statistical model in the AMI, HF, PN, COPD, and 
Stroke Mortality Update zip file on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    The proposed measure refinement would expand the measure cohort to 
include hospitalizations for patients with a principal discharge 
diagnosis of aspiration pneumonia and for patients with a principal 
discharge diagnosis of either sepsis or respiratory failure who also 
have a secondary diagnosis of pneumonia present on admission. We 
anticipate that this refined measure will first be publicly reported on 
Hospital Compare with the proposed cohort change in CY 2016.
    This refinement to the CMS 30-Day Pneumonia Mortality Measure is 
being proposed for several reasons. First, recent evidence has shown an 
increase in the use of sepsis and respiratory failure as principal 
diagnosis codes among patients hospitalized with pneumonia.\89\ 
Pneumonia patients with these principle diagnosis codes are not 
currently included in the measure cohort, and including them would 
better capture the complete patient population of a hospital with 
patients receiving clinical management and treatment for pneumonia.
---------------------------------------------------------------------------

    \89\ Lindenauer PK, Lagu T, Shieh MS, Pekow PS, Rothberg MB. 
Association of diagnostic coding with trends in hospitalizations and 
mortality of patients with pneumonia, 2003-2009. Journal of the 
American Medical Association. Apr 4 2012;307(13):1405-1413.
---------------------------------------------------------------------------

    Second, because patients with a principal diagnosis of sepsis and 
respiratory failure are not included in the current CMS 30-Day 
Pneumonia Mortality Measure specifications, efforts to evaluate changes 
over time in pneumonia outcomes could be biased as coding practices 
change.
    Finally, another published study \90\ has also demonstrated wide 
variation in the use of sepsis and respiratory failure codes as 
principal discharge diagnoses for pneumonia patients across hospitals, 
potentially biasing efforts to compare hospital performance on 30-day 
mortality. These published studies and CMS analyses show that hospitals 
that use sepsis and respiratory failure codes for the principal 
diagnosis frequently have better performance on the CMS 30-Day 
Pneumonia Mortality Measure. This coding practice improves performance 
on the measure because patients with greatest severity of illness (for 
example, those with sepsis or respiratory failure) are systematically 
excluded from the measure under current measure specifications, leaving 
only patients with less severity of illness in the cohort.
---------------------------------------------------------------------------

    \90\ Rothberg MB, Pekow PS, Priya A, Lindenauer PK. Variation in 
diagnostic coding of patients with pneumonia and its association 
with hospital risk-standardized mortality rates: A cross-sectional 
analysis. Annals of Internal Medicine. Mar 18 2014;160(6):380-388.
---------------------------------------------------------------------------

    In response to these emerging data, we examined coding patterns 
across hospitals caring for Medicare patients and sought to forecast 
the impact of enhancing or broadening the measure cohort to include the 
complete patient population, at each hospital, who are receiving 
clinical management and treatment for pneumonia. Our findings were 
consistent with a published study.\91\ That is, our results suggested 
that there is: (1) An increasing use of respiratory failure and sepsis 
as principal discharge diagnoses for pneumonia patients, and (2) wide 
variation across hospitals in the use of these codes.
---------------------------------------------------------------------------

    \91\ Rothberg MB, Pekow PS, Priya A, Lindenauer PK. Variation in 
diagnostic coding of patients with pneumonia and its association 
with hospital risk-standardized mortality rates: A cross-sectional 
analysis. Annals of Internal Medicine. Mar 18 2014;160(6):380-388.
---------------------------------------------------------------------------

    In addition to assessing the use of the principal diagnosis codes 
of sepsis and respiratory failure, we also analyzed coding patterns and 
the impact of expanding the pneumonia measure to include patients with 
the principal diagnosis of aspiration pneumonia. We noted after our 
analyses that aspiration pneumonia: (1) Is a common reason for 
pneumonia hospitalization, particularly among the elderly; (2) is 
currently not included in the CMS hospital outcome measure 
specifications for pneumonia patients; and (3) appears to be similarly 
subject to variation in diagnosis, documentation, and coding. These 
findings suggest that a measure with an enhanced or broader cohort for 
the current CMS 30-Day Pneumonia Mortality Measure will ensure that the 
measure includes more complete and comparable populations across 
hospitals. Use of comparable populations would reduce measurement bias 
resulting from different coding practices across hospitals. We believe 
that measure results derived from refinement of the measure cohort in 
the manner we are proposing, which will include additional pneumonia 
patients that are not being included under the current measure 
specifications, will improve the fidelity of the measure's assessment 
of quality and outcome for pneumonia.
    The proposed 30-Day Pneumonia Mortality Measure with this expanded 
measure cohort was included on a publicly available document entitled 
``List of Measures Under Consideration for December 1, 2014'' with 
identification number E0468 and has been reviewed by the MAP. The 
revised measure was conditionally supported pending NQF endorsement of 
the measure update, as detailed in the ``Spreadsheet of MAP 2015 Final 
Recommendations'' available at: http://www.qualityforum.org/map/. This 
refined pneumonia mortality measure will be submitted to NQF for re-
endorsement when the appropriate measure endorsement project has a call 
for measures this year. We will work to minimize potential confusion 
when publicly reporting the updated measure.
(2) Overview of Measure Cohort Change
    The proposed measure refinement would expand the cohort to include 
hospitalizations for patients with a principal discharge diagnosis of 
aspiration pneumonia and for patients with a principal discharge 
diagnosis of sepsis or respiratory failure who also have a secondary 
diagnosis of pneumonia that is coded as present on admission. The data 
sources, exclusion criteria, assessment of the outcome of mortality, 
and 3 year data evaluation period all remain unchanged.
(3) Risk Adjustment
    The statistical modeling approach as well as the measure 
calculation remain unchanged from the previously adopted measure. The 
risk adjustment approach also remains unchanged; however, we included 
additional risk variables to account for the discharge diagnoses added 
as part of the expanded cohort. For the full measure specifications of 
the proposed change to the measure, we refer readers to the AMI, HF, 
PN, COPD,

[[Page 24564]]

and Stroke Readmission Update zip file on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(4) Effect of Refinement of Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate (RSMR) Following Pneumonia Hospitalization 
Measure Cohort
    Using administrative claims data for FY 2015 (that is, discharges 
between July 2010-June 2013), we analyzed and simulated the effect of 
the proposed cohort refinements on the CMS 30-day Pneumonia Mortality 
Measure as if these changes had been applied for FY 2015. We note that 
these statistics are for illustrative purposes only, and we are not 
proposing to revise the measure calculations for the FY 2015 payment 
determination.
    Expanding the measure cohort to include a broader population of 
patients adds a large number of patients, as well as additional 
hospitals (which would now meet the minimum threshold of 25 cases), to 
the CMS 30-day Pneumonia Mortality Measure. In the FY 2010 IPPS/LTCH 
PPS final rule (74 FR 43881), we established that if a hospital has 
fewer than 25 eligible cases combined over a measure's reporting 
period, we would replace the hospital's data with a footnote indicating 
that the number of cases is too small to reliably determine how well 
the hospital is performing. These cases are still used to calculate the 
measure; however, for hospitals with fewer than 25 eligible cases, the 
hospital's mortality rates and interval estimates are not publicly 
reported for the measure. For more information about this minimum case 
threshold for public reporting, we refer readers to section VIII.A.13. 
of the preamble of this proposed rule. The increase in the size of the 
measure cohort proposed in this rule would change results for many 
hospitals and would change the number of hospitals that have greater 
than 25 cases.
    The previously adopted pneumonia mortality measure cohort includes 
976,590 patients and 4,418 hospitals for the FY 2015 payment 
determination. We noted the following effects for the CMS 30-Day 
Pneumonia Mortality Measure if the expanded cohort had been applied for 
FY 2015: (1) The expansion of the cohort would include an additional 
686,605 patients (creating a total measure cohort size of 1,663,195 
patients); (2) an additional 86 hospitals would meet the minimum 25 
patient cases volume threshold over the 3-year measure period and would 
be publicly reported for the measure; (3) 41 percent of the refined 
measure cohort would consist of patients with a principal discharge 
diagnosis of aspiration pneumonia and patients with a principal 
discharge diagnosis of sepsis or respiratory failure who also have a 
secondary diagnosis of pneumonia present on admission; and (4) there 
would be an increase in the number of hospitals considered outliers and 
a shift in some hospitals' outlier status classification, for example 
from ``better than the national rate'' to ``no different than the 
national rate'' or from ``worse than the national rate'' to ``no 
different than the national rate.''
    A detailed description of the refinements to the CMS 30-Day 
Pneumonia Mortality Measure and the effects of the change are available 
in the AMI, HF, PN, COPD, and Stroke Readmission Update zip file on our 
Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. 
We note that this file contains information for both Mortality and 
Readmission.
    We are inviting public comment on our proposal to refine the 
previously adopted Hospital 30-Day, All-Cause, Risk-Standardized 
Mortality Rate (RSMR) Following Pneumonia Hospitalization (NQF #0468) 
measure, expanding the measure cohort.
b. Proposed Refinement of Hospital 30-Day, All-Cause, Risk-Standardized 
Readmission Rate (RSRR) Following Pneumonia Hospitalization (NQF #0506) 
Measure Cohort
(1) Background
    In this proposed rule, we are proposing a refinement of the 
previously adopted measure, Hospital 30-day all-cause, risk-
standardized readmission rate following pneumonia hospitalization (NQF 
#0506) (hereinafter referred to as the CMS 30-Day Pneumonia Readmission 
Measure) which expands the measure cohort. For the purposes of 
describing the refinement of this measure, we note that ``cohort'' is 
defined as the hospitalizations, or ``index admissions,'' that are 
included in the measure and evaluated to ascertain whether the patient 
was subsequently readmitted to the hospital within 30 days of the index 
admission. This cohort is the set of hospitalizations that meets all of 
the inclusion and exclusion criteria and we are proposing an expansion 
to this set of hospitalizations.
    The previously adopted CMS 30-Day Pneumonia Readmission Measure, as 
specified in the FY 2009 IPPS PPS proposed rule (73 FR 23648) and 
adopted in the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68780 through 68781), includes hospitalizations for patients with a 
principal discharge diagnosis of pneumonia indicating viral or 
bacterial pneumonia. For measure cohort details of the currently 
implemented measure, we refer readers to the measure methodology report 
and measure risk adjustment statistical model in the AMI, HF, PN, COPD, 
and Stroke Readmissions Update zip file on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    This proposed measure refinement would expand the measure cohort to 
include hospitalizations for patients with a principal discharge 
diagnosis of aspiration pneumonia and for patients with a principal 
discharge diagnosis of either sepsis or respiratory failure who also 
have a secondary diagnosis of pneumonia present on admission. The 
determination to refine the measure cohort was based on our evaluation 
of both the frequency and variation in utilization of these diagnosis 
codes, as such coding practices have been described in recently 
published studies. We anticipate that this measure will first be 
publicly reported with the proposed cohort change in CY 2016.
    This refinement to the CMS 30-Day Pneumonia Readmission Measure is 
being proposed in response to recent evidence showing increasing use of 
the principal diagnosis codes of sepsis and respiratory failure among 
patients hospitalized with pneumonia. Including such patients will 
better represent the complete population of a hospital's patients who 
are receiving clinical management and treatment for pneumonia. In 
addition, because patients with a principal diagnosis of sepsis and 
respiratory failure are not included in the current CMS 30-Day 
Pneumonia Readmission Measure specifications, efforts to evaluate 
changes over time in pneumonia outcomes could be biased as coding 
practices change.
    Wide variation exists in the use of sepsis and respiratory failure 
codes across hospitals, potentially biasing efforts to compare hospital 
performance on 30-day readmission rates.\92\ While

[[Page 24565]]

the referenced study \93\ evaluated the effect of coding practices on 
mortality measure performance, the rationale is applicable to 
readmission measure performance as well. The increased use of sepsis 
and respiratory failure diagnosis codes improves performance because 
the patients with greatest severity of illness (for example, those with 
sepsis or respiratory failure) are currently systematically excluded 
from the measure, leaving only patients with lesser severity of illness 
in the measure cohort.
---------------------------------------------------------------------------

    \92\ Rothberg MB, Pekow PS, Priya A, Lindenauer PK.: Variation 
in diagnostic coding of patients with pneumonia and its association 
with hospital risk-standardized mortality rates: A cross-sectional 
analysis. Annals of Internal Medicine. Mar 18 2014;160(6):380-388.
    \93\ Rothberg MB, Pekow PS, Priya A, Lindenauer PK.: Variation 
in diagnostic coding of patients with pneumonia and its association 
with hospital risk-standardized mortality rates: A cross-sectional 
analysis. Annals of Internal Medicine. Mar 18 2014;160(6):380-388.
---------------------------------------------------------------------------

    In response to this emerging data, we examined coding patterns 
across hospitals caring for Medicare patients and sought to forecast 
the impact of broadening the measure cohort to include the complete 
population of patients at each hospital who are receiving clinical 
management and treatment for pneumonia. Our findings were consistent 
with a published study \94\ for mortality; that is, our results 
suggested that there is an increasing use of respiratory failure and 
sepsis as principal discharge diagnoses for pneumonia patients, as well 
as showed wide variation across hospitals in the use of these codes. In 
addition to assessing the use of the principal diagnosis codes of 
sepsis and respiratory failure, we also analyzed coding patterns and 
the impact of expanding the pneumonia measure to include patients with 
the principal diagnosis of aspiration pneumonia. We noted after our 
analyses that aspiration pneumonia: (1) Is a common reason for 
pneumonia hospitalization, particularly among the elderly; (2) is 
currently not included in the CMS hospital outcome measure 
specifications for pneumonia patients; and (3) appears to be similarly 
subject to variation in diagnosis, documentation, and coding. These 
findings suggest that expanding the measure cohort for the current CMS 
30-Day Pneumonia Readmission Measure will ensure the measure includes 
more complete and comparable populations across hospitals. Use of 
comparable populations would reduce measurement bias resulting from 
different coding practices seen across hospitals. We believe that 
measure results derived from refinement of the measure cohort in the 
manner we are proposing, which will include additional pneumonia 
patients that are not being included under the current measure 
specifications, will improve the fidelity of the measure's assessment 
of quality and outcome for pneumonia.
---------------------------------------------------------------------------

    \94\ Rothberg MB, Pekow PS, Priya A, Lindenauer PK.: Variation 
in diagnostic coding of patients with pneumonia and its association 
with hospital risk-standardized mortality rates: A cross-sectional 
analysis. Annals of Internal Medicine. Mar 18 2014;160(6):380-388.
---------------------------------------------------------------------------

    The proposed refined measure was included on a publicly available 
document entitled ``List of Measures Under Consideration for December 
1, 2014'' with identification number E0506, has been reviewed by the 
MAP, and was conditionally supported pending NQF review of the measure 
update. In particular, MAP members noted that the measure should be 
considered for socio-demographic status (SDS) adjustment in the 
upcoming NQF trial period, reviewed for the empirical and conceptual 
relationship between SDS factors and risk-standardized readmission 
rates, and endorsed with appropriate consideration of SDS factors as 
determined by NQF standing committees. We refer readers to the 
``Spreadsheet of MAP 2015 Final Recommendations'' available at: http://www.qualityforum.org/map/ for more information. When the appropriate 
measure endorsement project has a call for measures in 2015, this 
measure will be submitted to the NQF for reendorsement with special 
consideration of the potential impact of SDS adjustment on the measure.
(2) Overview of Measure Cohort Change
    The proposed measure refinement would expand the measure cohort to 
include hospitalizations for patients with a principal discharge 
diagnosis of aspiration pneumonia and for patients with a principal 
discharge diagnosis of sepsis or respiratory failure who also have a 
secondary diagnosis of pneumonia that is coded as present on admission. 
The data sources, exclusion criteria, assessment of the outcome of 
readmission, and previous 3 years data evaluation period remain 
unchanged.
(3) Risk Adjustment
    The statistical modeling approach as well as the measure 
calculation remain unchanged from the previously adopted measure. The 
risk adjustment approach also remains unchanged; however, we included 
additional risk variables to account for the discharge diagnoses added 
as part of the expanded cohort. For the full measure specifications of 
the proposed changes to the measure, we refer readers to the AMI, HF, 
PN, COPD, and Stroke Readmissions Update zip file on our Web site at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(4) Effect of Refinement of Hospital 30-Day, All-Cause, Risk-
Standardized Readmission Rate (RSRR) Following Pneumonia 
Hospitalization Measure Cohort
    Using administrative claims data for FY 2015 (that is, discharges 
between July 2010-June 2013); we analyzed and simulated the effect of 
the proposed measure cohort refinements on the CMS 30-Day Pneumonia 
Readmission Measure as if these changes had been applied for FY 2015. 
We note that these statistics are for illustrative purposes only, and 
we are not proposing to revise the measure calculations for the FY 2015 
payment determination. We anticipate that this measure will first be 
publicly reported with the proposed cohort change in CY 2016.
    Based on our analysis, we anticipate that expanding the measure 
cohort to include a broader population of patients would add a large 
number of patients, as well as additional hospitals (which would now 
meet the minimum threshold of 25 cases), to the CMS 30-Day Pneumonia 
Readmission Measure. In the FY 2010 IPPS/LTCH PPS final rule (74 FR 
43881), CMS established that if a hospital has fewer than 25 eligible 
cases combined over a measure's reporting period, we would replace the 
hospital's data with a footnote indicating that the number of cases is 
too small to reliably tell how well the hospital is performing. These 
cases are still used to calculate the measure; however, for hospitals 
with fewer than 25 eligible cases, the hospital's readmission rates and 
interval estimates are not publicly reported for the measure. For more 
information about this minimum case threshold for public reporting, we 
refer readers to section VIII.A.13. of the preamble of this proposed 
rule. The increase in the size of the measure cohort proposed in this 
measure cohort would change results for many hospitals and would change 
the number of hospitals that have greater than 25 cases.
    The previously adopted pneumonia readmission measure cohort 
includes 1,094,959 patients and 4,451 hospitals for FY 2015 payment 
determination. We noted the following effects for the CMS 30-Day 
Pneumonia Readmission Measure if the expanded cohort had been applied 
for FY 2015: (1) The expansion of the CMS 30-Day Pneumonia Readmission 
Measure cohort would include an additional 670,491 patients (creating a 
total measure cohort of 1,765,450 patients); (2) there would be an 
additional 67

[[Page 24566]]

hospitals that meet the minimum 25 patient cases volume threshold over 
the 3-year applicable period and would be publicly reported for the 
measure; (3) patients with a principal discharge diagnosis of 
aspiration pneumonia and patients with a principal discharge diagnosis 
of sepsis or respiratory failure who also have a secondary diagnosis of 
pneumonia present on admission would represent 38 percent of the total 
expanded measure cohort; and (4) there would be an increase in the 
number of hospitals considered outliers and a shift in some hospitals' 
outlier status classification, for example from ``better than the 
national rate'' to ``no different than the national rate'' or from 
``worse than the national rate'' to ``no different than the national 
rate.''
    A detailed description of the refinements to the CMS 30-Day 
Pneumonia Readmission Measure and the effects of the change are 
available in the AMI, HF, PN, COPD, and Stroke Readmission Updates zip 
file on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    We are inviting public comment on our proposal to refine the 
previously adopted Hospital 30-day, All-Cause, Risk-Standardized 
Readmission Rate (RSRR) following Pneumonia Hospitalization (NQF #0506) 
measure, which expands the measure cohort.
7. Proposed Additional Hospital IQR Program Measures for the FY 2018 
Payment Determination and Subsequent Years
    We are proposing to add eight new measures to the Hospital IQR 
Program for the FY 2018 payment determination and subsequent years. We 
are proposing to adopt seven new claims-based measures and one new 
structural measure: (1) Hospital Survey on Patient Safety Culture 
(structural); (2) Kidney/UTI Clinical Episode-Based Payment Measure 
(claims-based); (3) Cellulitis Clinical Episode-Based Payment Measure 
(claims-based); (4) Gastrointestinal Hemorrhage Clinical Episode-Based 
Payment Measure (claims-based); (5) Lumbar Spine Fusion/Re-Fusion 
Clinical Episode-Based Payment Measure (claims-based); (6) Hospital-
Level, Risk-Standardized Payment Associated with an Episode-of-Care for 
Primary Elective THA/TKA (claims-based); (7) Excess Days in Acute Care 
after Hospitalization for Acute Myocardial Infarction (claims-based); 
and (8) Excess Days in Acute Care after Hospitalization for Heart 
Failure (claims-based).
    The proposed measures were included on a publicly available 
document entitled ``List of Measures Under Consideration for December 
1, 2014'' \95\ in compliance with section 1890A(a)(2) of the Act, and 
they were reviewed by the MAP as discussed in its MAP Pre-Rulemaking 
Report and Spreadsheet of MAP 2015 Final Recommendations.\96\
---------------------------------------------------------------------------

    \95\ Measure Applications Partnership: List of Measures Under 
Consideration (MUC) for December 1, 2014. Retrieved from http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78318.
    \96\ National Quality Forum ``Process and Approach for MAP Pre-
Rulemaking Deliberations 2015'' found at: http://www.qualityforum.org/Publications/2015/01/Process_and_Approach_for_MAP_Pre-Rulemaking_Deliberations_2015.aspx 
and ``Spreadsheet of MAP 2015 Final Recommendations'' available at: 
http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

    For purposes of the Hospital IQR Program, section 
1886(b)(3)(B)(IX)(aa) of the Act requires that any measure specified by 
the Secretary must have been endorsed by the entity with a contract 
under section 1890(a) of the Act. The NQF currently holds this 
contract. However, section 1886(b)(3)(B)(IX)(bb) of the Act provides an 
exception that, in the case of a specified area or medical topic 
determined appropriate by the Secretary for which a feasible and 
practical measure has not been endorsed by the entity with a contract 
under section 1890(a) of the Act, the Secretary may specify a measure 
that is not so endorsed as long as due consideration is given to 
measures that have been endorsed or adopted by a consensus organization 
identified by the Secretary.
a. Hospital Survey on Patient Safety Culture
(1) Background
    For the FY 2018 payment determination and subsequent years, we are 
proposing to adopt the Hospital Survey on Patient Safety Culture. This 
proposed structural measure assesses whether a hospital administers a 
patient safety culture survey. Improving the safety of patient care is 
a priority and a quality improvement goal for CMS. We believe this 
structural measure will allow us to gain an understanding of whether 
hospitals are using a survey of patient safety culture in their 
hospitals. Because the number of questions in this measure is limited 
to five and can be completed using a Web-based tool, we believe this 
structural measure will not add undue reporting burden to hospitals.
    We note that patient safety culture surveys are useful tools for 
measuring organizational conditions that can lead to adverse events and 
other incidences that can cause harm to patients in health care 
organizations.\97\ Patient safety culture surveys can be used to: (1) 
Raise staff awareness about patient safety; (2) assess the current 
status of patient safety culture; (3) identify strengths and areas for 
improvement; and (4) examine trends in patient safety culture over 
time.\98\
---------------------------------------------------------------------------

    \97\ Nieva VF, Sorra J.: Safety culture assessment: a tool for 
improving patient safety in healthcare organizations. Qual Saf 
Health Care 2003; 12:ii17-23.
    \98\ Frequently Asked Questions: Surveys on Patient Safety 
Culture. October 2014. Agency for Healthcare Research and Quality, 
Rockville, MD. Available at: http://www.ahrq.gov/professionals/quality-patient-safety/patientsafetyculture/pscfaq.html.
---------------------------------------------------------------------------

    There are multiple surveys that are currently used by the 
healthcare industry to assess patient safety culture including: the 
Pascal Metrics' Safety Attitudes Questionnaire (SAQ),\99\ the Agency 
for Healthcare Research and Quality (AHRQ) Hospital Survey on Patient 
Safety Culture (HSOPSC),\100\ the Patient Safety Climate in Healthcare 
Organizations (PSCHO),\101\ and the Manchester Patient Safety 
Framework.\102\ However, it is not clear which patient safety culture 
survey is used most frequently, or how many hospitals consistently 
assess their performance on these surveys. One example of use of a 
patient safety culture survey is the HSOPSC, which is nonproprietary 
and available to hospitals at no cost. AHRQ developed the survey, with 
CMS input, released it in 2004, and subsequently displayed results from 
653 hospitals in 2014.\103\ Use of the HSOPSC, as well as reporting 
results to AHRQ, was and continues to be voluntary. Among the reporting 
hospitals, there was variation in frequency of survey use, format of 
administration (Web versus paper) and staff sampling scheme.\104\
---------------------------------------------------------------------------

    \99\ Survey. (n.d.). Available at: http://www.pascalmetrics.com/solutions/survey/.
    \100\ Hospital Survey on Patient Safety Culture. (n.d.). 
Available at: http://www.ahrq.gov/professionals/quality-patient-safety/patientsafetyculture/hospital/index.html.
    \101\ Measurement Instrument Database for the Social Sciences. 
(n.d.). Available at: http://www.midss.org/content/patient-safety-climate-healthcare-organizations-pscho.
    \102\ Dianne, P. (n.d.). Manchester Patient Safety Framework 
(MaPSaF). National Patient Safety Agency. Available at: http://www.nrls.npsa.nhs.uk/resources/?entryid45=59796.
    \103\ Hospital Survey on Patient Safety Culture: 2014 User 
Comparative Database Report: Executive Summary. March 2014. Agency 
for Healthcare Research and Quality, Rockville, MD. Available at: 
http://www.ahrq.gov/professionals/quality-patient-safety/patientsafetyculture/hospital/2014/hosp14summ.html.
    \104\ Hospital Survey on Patient Safety Culture: 2014 User 
Comparative Database Report: Executive Summary. March 2014. Agency 
for Healthcare Research and Quality, Rockville, MD. Available at: 
http://www.ahrq.gov/professionals/quality-patient-safety/patientsafetyculture/hospital/2014/hosp14summ.html.

---------------------------------------------------------------------------

[[Page 24567]]

    Through the proposed Hospital Survey on Patient Safety Culture 
Measure, we will begin to understand how hospitals are using surveys, 
like the examples cited above, in improving their patient safety 
culture. This proposed measure will allow CMS to collect data on 
whether a hospital conducts a patient safety culture survey, and if so, 
which tool they use, how frequently the tool is administered, and the 
response rate. This structural measure will help inform CMS of whether 
a measure targeting the culture of patient safety using a specific 
survey is feasible.
    Finally, we note that the MAP supports this measure and 
specifically highlighted that a patient safety culture survey is an 
important tool for hospitals to use to build a system of quality 
improvement within health care facilities.\105\ While this measure is 
not currently NQF-endorsed, we are proposing this measure in the 
Hospital IQR Program under the exception authority in section 
1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section 
VIII.A.7. of the preamble of this proposed rule. We considered other 
existing measures related to patient safety that have been endorsed by 
the NQF and we were unable to identify any NQF-endorsed measures that 
assess a patient safety culture, and found no other feasible and 
practical measures on this topic. We also are not aware of any other 
measures that assess whether a hospital administers a survey on patient 
safety.
---------------------------------------------------------------------------

    \105\ National Quality Forum Measure Application Partnership. 
``Spreadsheet of MAP 2015 Final Recommendations.'' Available at: 
http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

(2) Overview of Measure
    Reporting on a patient safety culture survey involves providing 
answers to the following questions listed below. Hospitals would submit 
answers via a Web-based tool on the QualityNet Web site:
    (A) Does your facility administer a detailed assessment of patient 
safety culture using a standardized collection protocol and structured 
instrument?
    (B) What is the name of the survey that is administered?
    (C) How frequently is the survey administered?
    (D) Does your facility report survey results to a centralized 
location? (Optional response options include the following: National 
data repository; State-based data repository; health system repository; 
other; and do not report the data outside the facility.)
    (E) During the most recent assessment:
    (a) How many staff members were requested to complete the survey?
    (b) How many completed surveys were received?
    (These questions can allow calculation of a response rate.)
(3) Data Sources
    For FY 2018 payment determination and subsequent years, we are 
proposing that data collection for this structural measure for 
hospitals occur from January 1 through December 31 of each calendar 
year, with data submission occurring the following year. For the first 
year, data collection would be from January 1, 2016 through December 
31, 2016. These data will be collected via a Web-based tool available 
on the QualityNet Web site.
    We are inviting public comment on our proposal to adopt the 
Hospital Survey on Patient Safety Culture measure for the FY 2018 
payment determination and subsequent years.
b. Clinical Episode-Based Payment Measures
(1) Background
    Clinical episode-based payment measures are clinically coherent 
groupings of healthcare services that can be used to assess providers' 
resource use. Combined with other clinical quality measures, they 
contribute to the overall picture of providers' clinical effectiveness 
and efficiency. Episode-based performance measurement allows meaningful 
comparisons between providers based on resource use for certain 
clinical conditions or procedures, as noted in the NQF report for the 
``Episode Grouper Evaluation Criteria'' project available at: http://www.qualityforum.org/Publications/2014/09/Evaluating_Episode_Groupers__A_Report_from_the_National_Quality_Forum.aspx) and in various peer-reviewed articles.\106\ Episode-based 
measurement further supports CMS' efforts in response to the mandate in 
section 3003 of the Affordable Care Act that the Secretary develop an 
episode grouper to improve care efficiency and quality.
---------------------------------------------------------------------------

    \106\ For example: Hussey, P. S., Sorbero, M. E., Mehrotra, A., 
Liu, H., & Damberg, S. L.: (2009). Episode-Based Performance 
Measurement and Payment: Making It a Reality. Health Affairs, 28(5), 
1406-1417. doi:10.1377/hlthaff.28.5.1406.
---------------------------------------------------------------------------

    We are proposing four clinical episode-based payment measures for 
inclusion in the Hospital IQR Program beginning with the FY 2018 
payment determination: The Kidney/Urinary Tract Infection Clinical 
Episode-Based Payment measure, the Cellulitis Clinical Episode-Based 
Payment measure, the Gastrointestinal Hemorrhage Clinical Episode-Based 
Payment measure, and the Lumbar Spine Fusion/Refusion Clinical Episode-
Based Payment measure. The proposed measures evaluate the difference 
between observed and expected episode cost at the episode level before 
comparing at the provider level.
    The MAP conditionally supported these measures pending NQF 
endorsement.\107\ Once the call for measures for the Cost and Resource 
Use project at NQF is announced, these measures will be submitted for 
endorsement.
---------------------------------------------------------------------------

    \107\ National Quality Forum. The report is available at: http://www.qualityforum.org/Publications/2015/01/Process_and_Approach_for_MAP_Pre-Rulemaking_Deliberations_2015.aspx 
and the ``Spreadsheet of MAP 2015 Final Recommendations'' is 
available at: http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

    The measures we are proposing are described below, and detailed 
specifications can be found in the ``Measure Methodology'' report for 
proposed episodic payment measures, available at: http://
www.qualitynet.org  Hospital-Inpatient  Claims-
BasedMeasures  Proposed episodic payment measures 
 Measure Methodology. The measures follow the general 
construction of the previously adopted, NQF-endorsed, Hospital IQR 
Program measure, Payment-Standardized Medicare Spending per Beneficiary 
(MSPB), described in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51626) 
and include standardized payments for Medicare Part A and Part B 
services.\108\ Similar to the MSPB measure, the episodes are risk 
adjusted for individual patient characteristics and other factors (for 
example, attributes of inpatient stays). Unlike the MSPB measure 
however, these clinical episode-based measures include only Medicare 
Part A and B services that are clinically related to the triggering 
diagnosis or procedure.
---------------------------------------------------------------------------

    \108\ Detailed measure specifications can be found in the 
``Medicare Spending Per Beneficiary (MSPB) Measure Overview,'' 
available at: http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772053996.
---------------------------------------------------------------------------

    Mathematically, the methodology described below first computes the 
provider's Episode Amount (calculated as the average of the ratios of 
each episode's observed costs to its expected costs multiplied by the 
national average observed episode cost) and then divides the provider's 
Episode Amount by the

[[Page 24568]]

episode-weighted median of all providers' Episode Amounts (as shown in 
equation (A) below).
[GRAPHIC] [TIFF OMITTED] TP30AP15.001

where
Oij = observed episode cost for episode i in provider j,
Eij = expected episode cost for episode i in provider j,
Oi[isin]I = average observed episode cost across all episodes i 
nationally, and
nj = total number of episodes for provider j.

    This methodology builds on that which was submitted to the MAP, in 
response to MAP feedback, and in order to yield a national episode-
weighted measure. We are proposing these clinical episode-based payment 
measures because they meet the following episode selection criteria we 
established for the purpose of selecting the best conditions and 
procedures to begin with, for clinical episode-based payment measures: 
(1) The condition constitutes a significant share of Medicare payments 
and potential savings for hospitalized patients during and surrounding 
a hospital stay; (2) there was a high degree of agreement among 
clinical experts consulted for this project that standardized Medicare 
payments for services provided during this episode can be linked to the 
care provided during the hospitalization; (3) episodes of care for the 
condition are comprised of a substantial proportion of payments and 
potential savings for postacute care, indicating episode payment 
differences are driven by utilization outside of the MS-DRG payment; 
(4) episodes of care for the condition reflect high variation in post-
discharge payments, enabling differentiation among hospitals; and (5) 
the medical condition is managed by general medicine physicians or 
hospitalists and the surgical conditions are managed by surgical 
subspecialists, enabling comparison between similar practitioners.
(2) Kidney/Urinary Tract Infection Clinical Episode-Based Payment 
Measure
(A) Background
    Inpatient hospital stays and associated services assessed by the 
Kidney/Urinary Tract Infection Clinical Episode-Based Payment measure 
have high costs with substantial variation. In CY 2012, Medicare FFS 
beneficiaries experienced over 234,000 kidney/urinary tract infection 
episodes triggered by related inpatient stays.\109\ Payment-
standardized, risk-adjusted episode costs for these episodes (cost of 
the hospitalization plus the cost of clinically related services in the 
episode window) totaled more than $2.5 billion in 2012, with an average 
episode cost of over $10,000. There is substantial variation in kidney/
urinary tract infection episode costs--ranging from approximately 
$4,800 at the 5th percentile to approximately $27,000 at the 95th--that 
is driven by variation in post-discharge costs clinically-related to 
the inpatient hospitalization. These clinically-related post-discharge 
costs are an indicator of the quality of care provided during the 
hospitalization.
---------------------------------------------------------------------------

    \109\ The number of episodes and associated costs are calculated 
using the methodology for developing hospital-based episode measures 
proposed by Acumen LLC and outlined in the supplemental 
documentation for the FY 2015 IPPS and LTCH Prospective Payment 
System Proposed Rule. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html.
---------------------------------------------------------------------------

    The MAP conditionally supported this measure pending NQF review and 
endorsement. Members noted that this measure addresses the cost of care 
for common conditions, but other members expressed caution that the 
most efficient providers may reduce overall hospitalizations and that 
the remaining hospitalizations may be a biased sample for measuring 
performance across providers. In response to this concern, we note that 
this measure is limited by design to the inpatient hospital, which 
means that resource use is evaluated only for patients that have been 
hospitalized for the episode condition, and providers are evaluated 
relative to other providers treating hospitalized patients. To address 
the concern that providers involved in the hospitalization of only the 
most complex cases might be disadvantaged under the measure, we note 
that the episode is risk-adjusted to account for differences in patient 
characteristics that may affect costs, such that expected costs for 
more complex patients will be higher and expected costs for less 
complex patients will be lower. Risk adjustment is described in section 
VIII.A.7.b.(7)(B) of the preamble of this proposed rule. Once the call 
for measures for the Cost and Resource Use project at NQF is announced, 
this measure will be submitted for endorsement.
    We are proposing this measure in the Hospital IQR Program under the 
exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as 
previously discussed in section VIII.A.7. of the preamble of this 
proposed rule. We considered other existing measures related to 
efficiency that have been endorsed by the NQF and we were unable to 
identify any NQF-endorsed measures that assess kidney/urinary tract 
infection. We also are not aware of any other measures that assess 
kidney/urinary tract infection treatment efficiency and found no other 
feasible and practical measures on this topic.
(B) Overview of Measure
    The Kidney/Urinary Tract Infection Clinical Episode-Based Payment 
measure includes the set of services provided to treat, manage, 
diagnose, and follow up on (including postacute care) a kidney/urinary 
tract infection-related hospital admission. This measure, like the NQF-
endorsed MSPB measure, assesses the cost of services initiated during 
an episode that spans the period immediately prior to, during, and 
following a beneficiary's hospital stay (the ``episode window''). In 
contrast to the MSPB measure, however, this measure includes Medicare 
payments for services during the episode window only if they are 
clinically related to the health condition that was treated during the 
index hospital stay.
(C) Data Sources
    The Kidney/Urinary Tract Infection Clinical Episode-Based Payment 
measure is an administrative claims-based measure. It uses Part A and 
Part B Medicare administrative claims data from Medicare FFS 
beneficiaries hospitalized with an MS-DRG that identifies a kidney/
urinary tract infection.

[[Page 24569]]

(D) Measure Calculation
    The measure sums the Medicare payment amounts for clinically 
related Part A and Part B services provided during the episode window 
and attributes them to the hospital at which the index hospital stay 
occurred. Medicare payments included in this episode-based measure are 
standardized and risk-adjusted as described later in section 
VIII.A.7.b.(7)(B) of the preamble of this proposed rule. The period of 
performance for the measure is one year, beginning with calendar year 
2016. Similar to the MSPB measure's construction, this measure is 
expressed as a risk-adjusted ratio, which allows for ease of comparison 
over time, without need to adjust for inflation or any potential 
changes in CMS payment policy. The numerator is the Episode Amount, 
calculated as the average of the ratios of each episode's observed 
costs to its expected costs multiplied by the national average observed 
episode cost. The denominator is the episode-weighted median of all 
providers' Episode Amounts. A kidney/urinary tract infection episode 
begins 3 days prior to the initial (that is, index) admission and 
extends 30 days following the discharge from the index hospital stay.
    (E) Cohort
    The measure cohort includes Medicare FFS beneficiaries hospitalized 
with an MS-DRG that indicates a kidney/urinary tract infection. 
Additional details including the exclusion criteria are described in 
section VIII.A.7.b.(6) of the preamble of this proposed rule.
    We are inviting public comment on our proposal to adopt the Kidney/
Urinary Tract Infection Clinical Episode-Based Payment measure for the 
FY 2018 payment determination and subsequent years.
(3) Cellulitis Clinical Episode-Based Payment Measure
(A) Background
    Inpatient hospital stays and associated services assessed by the 
Cellulitis Clinical Episode-Based Payment measure have high costs with 
substantial variation. In CY 2012, Medicare FFS beneficiaries 
experienced more than 143,000 cellulitis episodes triggered by related 
inpatient stays.\110\ Payment-standardized, risk-adjusted episode costs 
for these episodes (cost of the hospitalization plus the cost of 
clinically related services in the episode window) totaled more than 
$1.4 billion in 2012, with an average episode cost of approximately 
$10,000. There is substantial variation in cellulitis episode costs--
ranging from about $5,000 at the 5th percentile to about $24,000 at the 
95th--that is driven by variation in post-discharge costs clinically-
related to the inpatient hospitalization. These clinically related 
post-discharge costs are an indicator of the quality of care provided 
during the hospitalization.
---------------------------------------------------------------------------

    \110\ The number of episodes and associated costs are calculated 
using the methodology for developing hospital-based episode measures 
proposed by Acumen LLC and outlined in the supplemental 
documentation for the FY 2015 IPPS and LTCH Prospective Payment 
System Proposed Rule. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html.
---------------------------------------------------------------------------

    The MAP conditionally supported this measure pending NQF review and 
endorsement. Members noted that this measure addresses the cost of care 
for an important condition. Other members expressed caution on the use 
of this measure noting that cellulitis is a highly variable condition 
that may be challenging to measure using an episode-based framework. 
Once the call for measures for the Cost and Resource Use project at NQF 
is announced, this measure will be submitted for endorsement. We note 
that there is substantial variation in cellulitis episode costs that is 
driven by variation in post-discharge costs clinically-related to the 
inpatient hospitalization. This variation suggests that there may be 
opportunity to improve the efficiency of care for cellulitis treatment.
    We are proposing this measure in the Hospital IQR Program under the 
exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as 
previously discussed in section VIII.A.7. of the preamble of this 
proposed rule. We considered other existing measures related to 
efficiency that have been endorsed by the NQF and we were unable to 
identify any NQF-endorsed measures that assess cellulitis. We also are 
not aware of any other measures that assess cellulitis treatment 
efficiency, and found no other feasible and practical measures on this 
topic.
(B) Overview of Measure
    The Cellulitis Clinical Episode-Based Payment measure includes the 
set of services provided to treat, manage, diagnose, and follow up on 
(including post-acute care) a cellulitis-related hospital admission. 
The Cellulitis Clinical Episode-Based Payment measure, like the MSPB 
measure, assesses the cost of services initiated during an episode that 
spans the period immediately prior to, during, and following a 
beneficiary's hospital stay (the ``episode window''). In contrast to 
the MSPB measure, the Cellulitis Clinical Episode-Based Payment measure 
includes Medicare payments for services during the episode window only 
if they are clinically related to the health condition that was treated 
during the index hospital stay.
(C) Data Sources
    The Cellulitis Clinical Episode-Based Payment measure is an 
administrative claims-based measure. It uses Part A and Part B Medicare 
administrative claims data from Medicare FFS beneficiaries hospitalized 
with an MS-DRG that identifies cellulitis.
(D) Measure Calculation
    The measure sums the Medicare payment amounts for clinically 
related Part A and Part B services provided during this episode window 
and attributes them to the hospital at which the index hospital stay 
occurred. Medicare payments included in this episode-based measure are 
standardized and risk-adjusted as described in section 
VIII.A.7.b.(7)(B) of the preamble of this proposed rule. The period of 
performance is one year, beginning with calendar year 2016. Similar to 
the MSPB measure's construction, this measure is expressed as a risk-
adjusted ratio, which allows for ease of comparison over time, without 
need to adjust for inflation or any potential changes in CMS payment 
policy. The numerator is the Episode Amount, calculated as the average 
of the ratios of each episode's observed costs to its expected costs 
multiplied by the national average observed episode cost. The 
denominator is the episode-weighted median of all providers' Episode 
Amounts. A cellulitis episode begins 3 days prior to the initial (that 
is, index) admission and extends 30 days following the discharge from 
the index hospital stay.
(E) Cohort
    The measure cohort includes Medicare FFS beneficiaries hospitalized 
with an MS-DRG that indicates cellulitis. Additional details including 
the exclusion criteria are described in section VIII.A.7.b.(6) of the 
preamble of this proposed rule.
    We are inviting public comment on our proposal to adopt the 
Cellulitis Clinical Episode-Based Payment measure for the FY 2018 
payment determination and subsequent years.
(4) Gastrointestinal Hemorrhage Clinical Episode-Based Payment Measure
(A) Background
    Inpatient hospital stays and associated services assessed by the GI 
Hemorrhage Clinical Episode-Based Payment measure have high costs with

[[Page 24570]]

substantial variation. In calendar year 2012, Medicare FFS 
beneficiaries experienced 181,646 GI hemorrhage episodes triggered by 
related inpatient stays.\111\ Payment-standardized, risk-adjusted 
episode costs for these episodes (cost of the hospitalization plus the 
cost of clinically related services in the episode window) totaled 
nearly $2 billion in 2012, with an average episode cost of about 
$11,000. There is substantial variation in GI hemorrhage episode 
costs--ranging from approximately $6,500 at the 5th percentile to 
approximately $23,000 at the 95th--that is driven by variation in post-
discharge costs clinically related to the inpatient hospitalization. 
These clinically related post-discharge costs are an indicator of the 
quality of care provided during the hospitalization. For the purposes 
of reporting, and as suggested by the MAP, the GI hemorrhage episodes 
may be split into those treating an upper GI bleed and those treating a 
lower GI bleed due to clinical differences in patterns of care for 
those treatments. More information can be found in the supplemental 
documentation for the FY 2016 IPPS and LTCH Prospective Payment System 
Proposed Rule available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html.
---------------------------------------------------------------------------

    \111\ The number of episodes and associated costs are calculated 
using the methodology for developing hospital-based episode measures 
proposed by Acumen LLC and outlined in the supplemental 
documentation for the FY 2015 IPPS and LTCH Prospective Payment 
System Proposed Rule. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html.
---------------------------------------------------------------------------

    The MAP conditionally supported this measure pending NQF review and 
endorsement. MAP members noted that this measure addresses the cost of 
care for GI bleeding. Several members expressed caution that the most 
efficient providers may reduce overall hospitalizations thus those 
inpatient hospitalizations that remain are a biased sample for 
measuring performance across providers. In response to these concerns, 
we note that this measure is limited by design to GI hemorrhage 
episodes treated in the inpatient hospital, which means that resource 
use is evaluated only for patients that have been hospitalized for the 
episode condition, and providers are evaluated relative to other 
providers treating hospitalized patients. With regard to the concern 
that efficient providers may reduce hospitalizations, leaving a biased 
sample of less efficient providers, we note that the episode is risk-
adjusted to account for differences in patient characteristics that may 
affect costs, thus to the extent that variation in treatment prior to 
hospitalization results in patterns of sicker (or healthier) GI 
hemorrhage patients admitted to certain hospitals, risk adjustment 
addresses these differences. For example, for providers who admit 
comparatively less complex patients to the inpatient hospital for 
treatment of GI bleeds, risk adjustment would cause their expected 
costs to be lower. Risk adjustment is described in section 
VIII.A.7.b.(7)(B) of the preamble of this proposed rule. Once the call 
for measures for the Cost and Resource Use project at NQF is announced, 
this measure will be submitted for endorsement.
    We are proposing this measure in the Hospital IQR Program under the 
exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as 
previously discussed in section VIII.A.7. of the preamble of this 
proposed rule. We considered other existing measures related to 
efficiency that have been endorsed by the NQF and we were unable to 
identify any NQF-endorsed measures that assess GI hemorrhage. We also 
are not aware of any other measures that assess GI hemorrhage treatment 
efficiency, and found no other feasible and practical measures on this 
topic.
(B) Overview of Measure
    The Gastrointestinal Hemorrhage Clinical Episode-Based Payment 
measure includes the set of services provided to treat, manage, 
diagnose, and follow up on (including postacute care) a 
gastrointestinal hemorrhage-related hospital admission. This measure, 
like the MSPB measure, assesses the cost of services initiated during 
an episode that spans the period immediately prior to, during, and 
following a beneficiary's hospital stay (the ``episode window''). In 
contrast to the MSPB measure, the Gastrointestinal Hemorrhage Clinical 
Episode-Based Payment measure includes Medicare payments for services 
during the episode window only if they are clinically related to the 
health condition that was treated during the index hospital stay.
(C) Data Sources
    The Gastrointestinal Hemorrhage Clinical Episode-Based Payment 
measure is an administrative claims-based measure. It uses Part A and 
Part B Medicare administrative claims data from Medicare FFS 
beneficiaries hospitalized with an MS-DRG that identifies a 
gastrointestinal hemorrhage.
(D) Measure Calculation
    The measure sums the Medicare payment amounts for clinically 
related Part A and Part B services provided during the episode window 
and attributes them to the hospital at which the index hospital stay 
occurred. Medicare payments included in this episode-based measure are 
standardized and risk-adjusted as described in section VIII.A.7.b.(7) 
of the preamble of this proposed rule. The period of performance is 1 
year, beginning with CY 2016. Similar to the MSPB measure's 
construction, this measure is expressed as a risk-adjusted ratio, which 
allows for ease of comparison over time, without need to adjust for 
inflation or any potential changes in CMS payment policy. The numerator 
is the Episode Amount, calculated as the average of the ratios of each 
episode's observed costs to its expected costs multiplied by the 
national average observed episode cost. The denominator is the episode-
weighted median of all providers' Episode Amounts. A gastrointestinal 
hemorrhage episode begins 3 days prior to the initial (that is, index) 
admission and extends 30 days following the discharge from the index 
hospital stay.
(E) Cohort
    The measure cohort includes Medicare FFS beneficiaries hospitalized 
with an MS-DRG that indicates gastrointestinal hemorrhage. Additional 
details including the exclusion criteria are described in section 
VIII.A.7.b.(6) of the preamble of this proposed rule.
    We are inviting public comment on our proposal to adopt the 
Gastrointestinal Hemorrhage Clinical Episode-Based Payment measure for 
the FY 2018 payment determination and subsequent years.
(5) Lumbar Spine Fusion/Refusion Clinical Episode-Based Payment Measure
(A) Background
    Inpatient hospital stays and associated services assessed by the 
Spinal Fusion/Refusion Clinical Episode-Based Payment measure have high 
costs with substantial variation. In CY 2012, Medicare FFS 
beneficiaries experienced about 69,000 spinal fusion/refusion episodes 
triggered by related inpatient stays.\112\ Payment-

[[Page 24571]]

standardized, risk-adjusted episode costs for these episodes (cost of 
the hospitalization plus the cost of clinically related services in the 
episode window) totaled more than $2.6 billion in 2012, with an average 
episode cost of approximately $38,000. There is substantial variation 
in spinal fusion/refusion episode costs--ranging from approximately 
$28,000 at the 5th percentile to approximately $60,000 at the 95th--
that is driven by variation in post-discharge costs clinically related 
to the inpatient hospitalization. These clinically related post-
discharge costs are an indicator of the quality of care provided during 
the hospitalization.
---------------------------------------------------------------------------

    \112\ The number of episodes and associated costs are calculated 
using the methodology for developing hospital-based episode measures 
proposed by Acumen LLC and outlined in the supplemental 
documentation for the FY 2015 IPPS and LTCH Prospective Payment 
System Proposed Rule. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html.
---------------------------------------------------------------------------

    The MAP conditionally supported this measure pending NQF review and 
endorsement. Some members raised concerns that patients with cancer 
should be excluded from this measure. Once the call for measures for 
the Cost and Resource Use project at NQF is announced, this measure 
will be submitted for endorsement. We note that this measure is titled 
``Spine Fusion/Refusion Clinical Episode-Based Payment Measure'' in the 
MAP spreadsheet. Also, the episode is risk-adjusted to account for 
differences in patient characteristics, including the presence of 
cancer in the patient's history, which may affect costs but are outside 
of providers' control. Risk adjustment is described in section 
VIII.A.7.b.(7)(B) of the preamble of this proposed rule.
    We are proposing this measure in the Hospital IQR Program under the 
exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as 
previously discussed in section VIII.A.7. of the preamble of this 
proposed rule. We considered other existing measures related to 
efficiency that have been endorsed by the NQF and we were unable to 
identify any NQF-endorsed measures that assess spinal fusion/refusion. 
We also are not aware of any other measures that assess spinal fusion/
refusion treatment efficiency, and found no other feasible and 
practical measures on this topic.
(B) Overview of Measure
    The Lumbar Spine Fusion/Refusion Clinical Episode-Based Payment 
measure includes the set of services provided to treat, manage, 
diagnose, and follow up on (including postacute care) a lumbar spine 
fusion/refusion-related hospital admission. The Lumbar Spine Fusion/
Refusion Clinical Episode-Based Payment measure, like the MSPB measure, 
assesses the cost of services initiated during an episode that spans 
the period immediately prior to, during, and following a beneficiary's 
hospital stay (the ``episode window''). In contrast to the MSPB 
measure, the Lumbar Spine Fusion/Refusion Clinical Episode-Based 
Payment measure includes Medicare payments for services during the 
episode window only if they are clinically related to the health 
condition that was treated during the index hospital stay.
(C) Data Sources
    The Lumbar Spine Fusion/Refusion Clinical Episode-Based Payment 
measure is an administrative claims-based measure. It uses Part A and 
Part B Medicare administrative claims data from Medicare FFS 
beneficiaries hospitalized with an MS-DRG and ICD-9-CM procedure code 
that identify a lumbar spine fusion/refusion.
(D) Measure Calculation
    The measure sums the Medicare payment amounts for clinically 
related Part A and Part B services provided during the episode window 
and attributes them to the hospital at which the index hospital stay 
occurred. Medicare payments included in this episode-based measure are 
standardized and risk-adjusted as described in section VIII.A.7.b.(7) 
of the preamble of this proposed rule. The period of performance is 1 
year, beginning with calendar year 2016. Similar to the MSPB measure's 
construction, this measure is expressed as a risk-adjusted ratio, which 
allows for ease of comparison over time, without need to adjust for 
inflation or any potential changes in CMS payment policy. The numerator 
is the Episode Amount, calculated as the average of the ratios of each 
episode's observed costs to its expected costs multiplied by the 
national average observed episode cost. The denominator is the episode-
weighted median of all providers' Episode Amounts. A lumbar spine 
fusion/refusion episode begins 3 days prior to the initial (that is, 
index) admission and extends 30 days following the discharge from the 
index hospital stay.
(E) Cohort
    The measure cohort includes Medicare FFS beneficiaries hospitalized 
with an MS-DRG and ICD-9 Procedure code that indicate lumbar spine 
fusion/refusion. Additional details including the exclusion criteria 
are described in section VIII.A.7.b.(6) of the preamble of this 
proposed rule.
    We are inviting public comment on our proposal to adopt the Lumbar 
Spine Fusion/Refusion Clinical Episode-Based Payment measure for the FY 
2018 payment determination and subsequent years.
(6) Inclusion and Exclusion Criteria
    A full list of the MS-DRG codes used to identify beneficiaries 
included in the final cohort for each of the proposed episode-based 
payment measures can be found in the ``FY 2016 IPPS NPRM Episode 
Supplemental Documentation'' report in the ``Downloads'' section at: 
``NPRM Episode Supplemental Documentation'' report at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html.
    The exclusion methodology applied to each of these measures is the 
same as the one used to calculate the previously adopted MSPB measure 
described in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51626) and 
available in the ``MSPB Measure Information Form'' at: http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228772057350. Episodes for beneficiaries that meet any of the following 
criteria are excluded from the measure:
     Lack of continuous enrollment in Medicare Parts A and B 
from 90 days prior to index admission through the end of the episode 
with Medicare as the primary payer.
     Death date during episode window.
     Enrollment in Medicare Advantage during the episode 
window.
    In addition, claims that meet any of the following criteria do not 
trigger, or open, an episode:
     Claims with data coding errors, including missing date of 
birth or death dates preceding the date of the trigger event.
     Claims with payment <=0.
     Acute inpatient stays that involved a transfer.
     Claims from a non-IPPS or non-subsection (d) hospital.
    Claims that meet the following criterion will not be included in an 
episode:
     Claims with payment <=0.
(7) Standardization and Risk-Adjustment
(A) Standardization
    Standardization, or payment standardization, is the process of 
adjusting the allowed charge for a Medicare service to facilitate 
comparisons of resource use across geographic areas. Medicare payments 
included in these proposed episode-based measures would be standardized 
according to the standardization methodology previously finalized for 
the Hospital IQR Program MSPB measure in the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51626) and used for all

[[Page 24572]]

of the payment measures included in the Value-Based Payment Modifier 
Program. The methodology removes geographic payment differences, such 
as wage index and geographic practice cost index, incentive payment 
adjustments, and other add-on payments that support broader Medicare 
program goals, such as add-on payments for indirect graduate medical 
education (IME) and add-ons for serving a disproportionate share of 
uninsured patients (DSH).
(B) Risk Adjustment
    Risk adjustment uses patient claims history to account for case-mix 
variation and other factors. The steps used to calculate risk-adjusted 
payments align with the NQF-endorsed MSPB method as specified in the FY 
2012 IPPS/LTCH PPS final rule (76 FR 51624 through 51626). 
Specifications for the risk-adjustment employed in the proposed 
episode-based payment measures are included in the ``FY 2015 IPPS NPRM 
Episode Supplemental Documentation'' report, Section 4, titled 
``Calculating the Hospital-Based Episode Measure,'' which can be found 
in the ``FY 2016 IPPS NPRM Episode Supplemental Documentation'' report 
at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html.
    We are inviting public comment on our proposals.
c. Hospital-Level, Risk-Standardized Payment Associated With a 90-Day 
Episode-of-Care for Elective Primary Total Hip Arthroplasty (THA) and/
or Total Knee Arthroplasty (TKA)
(1) Background
    Between 2009 and 2012, there were 337,419 total hip arthroplasty 
(THA) procedures and 750,569 total knee arthroplasty (TKA) procedures 
for Medicare FFS patients 65 years and older.\113\ More than one-third 
of the U.S. population 65 years and older suffers from 
osteoarthritis,\114\ a disabling condition for which elective THA/TKAs 
are most commonly performed. Estimates place the annual insurer cost of 
osteoarthritis in the United States at $149 billion, with Medicare 
payments to hospitals for THA/TKA exceeding $15 billion annually.\115\
---------------------------------------------------------------------------

    \113\ Suter L, Grady JL, Lin Z et al.: 2013 Measure Updates and 
Specifications: Elective Primary Total Hip Arthroplasty (THA) And/Or 
Total Knee Arthroplasty (TKA) All-Cause Unplanned 30-Day Risk-
Standardized Readmission Measure (Version 2.0). 2013. http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    \114\ Osteoarthritis. 2011; http://www.cdc.gov/arthritis/basics/osteoarthritis.html.
    \115\ Miller DC, Gust C, Dimick JB, Birkmeyer N, Skinner J, 
Birkmeyer JD.: Large variations in Medicare payments for surgery 
highlight savings potential from bundled payment programs. Health 
Aff (Millwood). Nov 2011;30(11):2107-2115.
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    There is evidence of variation in payments at hospitals for 
patients undergoing THA and/or TKA. The mean 90-day risk-standardized 
payment among Medicare FFS patients aged 65 or older with a qualifying 
elective primary THA/TKA procedure in 2010-2012 was $23,248, and ranged 
from $16,421 to $35,123 across 2,614 hospitals.\116\ However, high or 
low payments to hospitals are difficult to interpret in isolation. Some 
high payment hospitals may have better clinical outcomes when compared 
with low payment hospitals while other high payment hospitals may not 
have better outcomes. Thus, CMS believes that payment measures provide 
complementary information to quality measures.
---------------------------------------------------------------------------

    \116\ Kim N, Ott LS, Lin Z et al.: Hospital-Level, Risk-
Standardized Payment Associated with a 90-Day Episode-of-Care for 
Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee 
Arthroplasty (TKA) (Version 1.0). 2014. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    Quality measures for THA/TKA, such as: (1) Hospital-level risk-
standardized complication rate (RSCR) following elective primary total 
hip arthroplasty (THA) and/or total knee arthroplasty (TKA) (NQF #1550) 
(77 FR 53515 through 53518), and (2) Hospital-level risk-standardized 
readmission rate (RSRR) following elective primary total hip 
arthroplasty (THA) and/or total knee arthroplasty (TKA) (NQF #1551) (77 
FR 53519 through 53521), are already adopted in the Hospital IQR 
Program and publicly reported, making THA/TKA an ideal procedure for 
which to assess payments for Medicare patients and relative hospital 
value. Including this proposed measure in the Hospital IQR Program and 
publicly reporting it on Hospital Compare would provide stakeholders 
with additional information about a hospital's cost of care for THA/TKA 
that will complement information about a hospital's quality of care. By 
including payments for 90 days after admission, this hospital-level 
resource use measure can capture the full spectrum of care and 
encourage collaboration and shared responsibility for patients' health 
after their procedures.
    We are proposing to include this non-NQF-endorsed measure in the 
Hospital IQR Program under the exception authority in section 
1886(b)(3)(B)(IX)(bb) of the Act as previously discussed in section 
VIII.A.7. of the preamble of this proposed rule. Although the proposed 
measure is not currently NQF-endorsed, we considered available measures 
that have been endorsed by the NQF, and were unable to identify any 
measures that assess hospital risk-standardized payment associated with 
a 90-day episode-of-care for elective primary THA/TKA. We also are not 
aware of any other 90-day episode-of-care THA/TKA measures that have 
been endorsed or adopted by a consensus organization, and found no 
other feasible and practical measures on this topic.
    The MAP conditionally supported this measure on December 10, 2014 
pending a timely review by the NQF Cost and Resource Use Standing 
Committee. The MAP recommended harmonizing and determining the most 
parsimonious approach to measures the costs of hip and knee 
replacements to minimize the burden and confusion of competing 
methodologies.\117\ Once the call for measures for the Cost and 
Resource Use project at NQF is announced, we will submit this measure 
for endorsement. In the meantime, we will consider ways to take these 
MAP recommendations into account.
---------------------------------------------------------------------------

    \117\ National Quality Forum. The report is available at: http://www.qualityforum.org/Publications/2015/01/Process_and_Approach_for_MAP_Pre-Rulemaking_Deliberations_2015.aspx 
and the ``Spreadsheet of MAP 2015 Final Recommendations'' is 
available at: http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

(2) Overview of Measure and Rationale for Examining Payments for a 90-
Day Episode-of-Care
    The THA/TKA payment measure assesses hospital risk-standardized 
payment associated with a 90-day episode-of-care for elective primary 
THA/TKA for any hospital participating in the Hospital IQR Program.
    When considering payments for Medicare patients, we focused on a 
90-day episode-of-care triggered by admission for several key reasons. 
First, THA and TKA procedures require ongoing post-discharge care. 
Second, the 90-day preset window encourages hospitals to optimize post-
discharge care. Third, mechanical complications and wound or joint 
infections may present after 30 days and rates of these complications 
remain elevated for at least 90 days. Fourth, the 90-day post-admission 
timeframe is consistent with CMS' THA/TKA complication measure, which 
captures specific complications up to 90 days after admission. 
Furthermore, we obtained input from a national Technical Expert Panel 
(TEP) on the most appropriate window for the

[[Page 24573]]

episode-of-care. Based on TEP feedback, we chose a measure follow-up 
period of 90 days that includes all payments for the initial 30 days of 
the episode, and all payments in a predefined set of care settings and 
services for days 31 through 90.
    We refer readers to the measure methodology report and measure risk 
adjustment statistical model on our Measure Methodology page, under the 
``Downloads'' section of the Web page. We refer readers to the ``Hip 
and Knee Arthroplasty Payment'' zip file on our Web site at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(3) Data Sources
    The proposed Hospital-Level, Risk-Standardized Payment Associated 
with a 90-Day Episode-of-Care for Elective Primary THA and/or TKA 
measure uses Part A and Part B Medicare administrative claims data that 
contain payments for Medicare FFS beneficiaries who were hospitalized 
and underwent an elective THA/TKA. This measure will use 3 years of 
data.
(4) Outcome
    The primary outcome of this measure is the hospital-level risk-
standardized payment for an elective primary THA/TKA episode-of-care. 
This measure captures payments for Medicare patients across multiple 
care settings, services, and supplies (inpatient, outpatient, skilled 
nursing facility, home health, hospice, physician/clinical laboratory/
ambulance services, and durable medical equipment, prosthetics/
orthotics, and supplies). This measure includes patient copayments as 
well as payments from coinsurance. While the approach to 
standardization in calculating payments over the episode is very 
similar to the previously adopted Hospital IQR measure, Payment-
Standardized Medicare Spending Per Beneficiary (MSPB) as described in 
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51626), the THA/TKA measure 
has a different cohort and risk-model. For more information on how MSPB 
is calculated, we refer readers to the measure development reports 
found on the QualityNet Web site at http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier4&cid=1228772057350.
    To isolate payment variation that reflects practice patterns rather 
than CMS payment adjustments, this measure excludes policy and 
geography payment adjustments unrelated to clinical care decisions. We 
achieve this by ``stripping'' or ``standardizing'' payments for each 
care setting. Stripping refers to removing geographic differences and 
policy adjustments in payment rates for individual services from the 
total payment for that service. Standardizing refers to averaging 
payments across geographic areas for those services where geographic 
differences in payment cannot be stripped. Stripping and standardizing 
the payment amounts allows for a fair comparison across hospitals based 
solely on payments for decisions related to clinical care of THA/TKA.
    By risk standardizing the payment measure, we are able to adjust 
for case-mix at any given hospital and compare a specific hospital's 
risk-standardized payment (RSP) to an average hospital with a similar 
case-mix. We define our analytic timeframe as beginning with the index 
admission for an elective primary THA/TKA to 90 days post-admission. 
The measurement includes all payments for the first 30 days after 
admission and only certain payments based on a pre-defined set of care 
settings and services for days 31-90.
(5) Cohort
    The measure includes Medicare FFS patients aged 65 or older 
admitted for elective primary THA and/or TKA, and calculates payments 
made on behalf of these patients (including payments made by CMS, 
patients, and other insurers) over a 90-day episode-of-care beginning 
with the index admission. The measure cohort aligns with another 
previously adopted Hospital IQR Program measure--90-day hospital-level 
risk-standardized complication rate (RSCR) following elective primary 
THA and/or TKA (NQF #1550) (77 FR 53516 through 53518). Consistent with 
this previously adopted measure, the proposed measure includes 
hospitalizations identified by a procedure code of either THA or TKA, 
as classified by the ICD-9-CM codes 81.51 and 81.54, respectively. The 
measure includes only those hospitalizations from short-stay acute care 
hospitals in the index cohort and restricts the cohort to patients 
enrolled in FFS Medicare Parts A and B (with no Medicare Advantage 
coverage).
(6) Inclusion and Exclusion Criteria
    This proposed measure includes hospitalizations for patients 65 
years and older at the time of index admission. An index admission/
hospitalization is the initial admission for a qualifying elective 
primary THA/TKA that triggers the 90-day episode-of-care for this 
payment measure. An index admission is the hospitalization to which the 
RSP outcome is attributed and includes index admissions for patients 
having a qualifying elective primary THA/TKA procedure. The measure 
excludes the following admissions from the measure cohort: (1) 
Admissions for patients without at least 90 days of post-admission 
enrollment in FFS Medicare Parts A and B because this is necessary to 
identify the outcome (payments) in the dataset over the analytic 
period; (2) admissions for patients discharged against medical advice 
(AMA) because hospitals had limited opportunity to implement high 
quality care; (3) admissions for patients transferred to federal 
hospitals because we do not have claims data for these hospitals, so 
including these patients would cause payments to be underestimated; (4) 
admissions for patients with more than two THA/TKA procedure codes 
during the index hospitalization because, although clinically possible, 
it is highly unlikely that patients would receive more than two 
elective THA/TKA procedures in one hospitalization, and this may 
reflect a coding error; (5) admissions that could not be matched to 
admissions in the THA/TKA complication measure because, as part of our 
data processing, we matched our index THA/TKA admissions to the THA/TKA 
complication measure cohort to obtain the risk-adjustment variables; 
and (6) admissions without a DRG weight and the provider received no 
payment because, without either DRG weight or payment data, we cannot 
calculate a payment for the patient's index admission.
(7) Risk Adjustment
    The measure adjusts for differences across hospitals in how 
payments are affected by patient comorbidities relative to patients 
cared for by other hospitals. We refer readers to the measure risk 
adjustment statistical model on our Measure Methodology Web page, under 
the ``Downloads'' section of the Web page. Please see the ``Hip and 
Knee Arthroplasty Payment'' zip file on our Web site at: http://cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
(8) Calculating the Risk-Standardized Payment (RSP)
    The measure is calculated using a hierarchical generalized linear 
model with a log link and an inverse Gaussian distribution, which is a 
widely accepted statistical method that enables fair evaluation of 
relative hospital performance by taking into account patient risk 
factors as well as the

[[Page 24574]]

number of patients that a hospital treats. This statistical model 
accounts for the structure of the data (patients clustered within 
hospitals) and calculates: (1) How much variation in hospital payment 
overall is accounted for by patients' individual risk factors (such as 
age and other medical conditions) and (2) how much variation is 
accounted for by hospital-specific performance. This approach 
appropriately models a positive, continuous, right-skewed outcome like 
payment and also accounts for the types of patients a hospital treats 
(that is, hospital case mix), the number of patients it treats, and the 
quality of care it provides. This hierarchical generalized linear model 
is an appropriate statistical approach to measuring quality based on 
patient outcomes when the patients are clustered within hospitals and 
sample sizes vary across hospitals. Clustered patients are within the 
same hospital, and the quality of care of the hospital affects all 
patients, so the outcomes for each hospital's patients are not fully 
independent (that is, completely unrelated) as is assumed by many 
statistical models. As noted above, the measure methodology defines 
hospital case mix based on the clinical diagnoses provided in the 
hospital claims for their patients' inpatient and outpatient visits for 
the 12 months prior to the THA/TKA hospitalization as well as select 
conditions indicated by secondary diagnosis codes on index admission. 
This methodology specifically does not, however, account for diagnoses 
present in the index admission that may indicate complications of care 
rather than patient comorbidities.
    The RSP is calculated as the ratio of predicted payments to 
expected payments and then the ratio is multiplied by the national 
unadjusted average payment for an episode-of-care. The ratio is greater 
than one for hospitals that have higher payments than would be expected 
for an average hospital with similar cases and less than one if the 
hospital has lower payments than would be expected for an average 
hospital with similar cases. This approach is analogous to a ratio of 
``observed'' or ``crude'' rate to an ``expected'' or ``risk-adjusted'' 
rate used in other similar types of statistical analyses. The RSP is a 
point estimate--the best estimate of a hospital's payment based on the 
hospital's case mix.
    To calculate the measure result for the Hospital IQR Program, we 
computed an interval estimate, which is similar to the concept of a 
confidence interval, to characterize the level of uncertainty around 
the point estimate. We use the point estimate and interval estimate to 
determine hospital performance (for example, higher than expected, as 
expected, or lower than expected). The interval estimate indicates that 
the true value of the payment ratio lies between the lower limit and 
the upper limit of the interval. For more detailed information on the 
calculation methodology, we refer readers to our Measure Methodology 
Web page, under the ``Downloads'' section. We refer readers to the 
``Hip and Knee Arthroplasty Payment'' zip file on our Web site at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    We are inviting public comment on our proposal to adopt the 
Hospital-Level, Risk-Standardized Payment Associated with a 90-Day 
Episode-of-Care for Elective Primary THA and/or TKA measure for the FY 
2018 payment determination and subsequent years.
d. Excess Days in Acute Care After Hospitalization for Acute Myocardial 
Infarction
(1) Background
    Acute myocardial infarction (AMI) is a priority area for outcomes 
measurement because it is a common condition associated with 
considerable morbidity, mortality, and healthcare spending. We note 
that AMI was the tenth most common principal discharge diagnosis among 
patients with Medicare in 2012.\118\ AMI also accounts for a large 
fraction of hospitalization costs, and it was the sixth most expensive 
condition billed to Medicare in 2011.\119\
---------------------------------------------------------------------------

    \118\ Agency for Healthcare Research and Quality (AHRQ). 
Healthcare Cost and Utilization Project (HCUP) http://hcupnet.ahrq.gov/.
    \119\ Torio CM, Andrews RM.: National Inpatient Hospital Costs: 
The Most Expensive Conditions by Payer, 2011. HCUP Statistical Brief 
#160. 2013; http://www.hcup-us.ahrq.gov/reports/statbriefs/sb160.jsp.
---------------------------------------------------------------------------

    Some of the costs for AMI can be attributed to high acute care 
utilization for post-discharge AMI patients in the form of 
readmissions, observation stays, and ED visits. We note that patients 
admitted for AMI have disproportionately high readmission rates, and 
that readmission rates following discharge for AMI are highly variable 
across hospitals in the United States.120 121 For the 
previously adopted Hospital IQR Program measure, Hospital 30-Day All-
Cause Risk-Standardized Readmission Rate (RSRR) following Acute 
Myocardial Infarction (AMI) Hospitalization (NQF #0505) (CY 2009 OPPS/
ASC final rule with comment period; 73 FR 68780 through 68781) 
(hereinafter referred to as READM-30-AMI), publicly reported 30-day 
risk-standardized readmission rates for AMI ranged from 17.5 percent to 
30.3 percent for the time period between July 2011 and June 2012.\122\ 
However, patients are not only at risk of requiring readmission in the 
post-discharge period. ED visits represent a significant proportion of 
post-discharge acute care utilization. Two recent studies conducted in 
patients of all ages have shown that 9.5 percent of patients return to 
the ED within 30 days of hospital discharge and that about 12 percent 
of these patients are discharged from the ED and are not captured by 
the previously adopted Hospital IQR Program READM-30-AMI 
measure.123 124
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    \120\ Krumholz HM, Merrill AR, Schone EM, et al.: Patterns of 
hospital performance in acute myocardial infarction and heart 
failure 30-day mortality and readmission. Circulation. 
Cardiovascular Quality & Outcomes. Sep 2009;2(5):407-413.
    \121\ Bernheim SM, Grady JN, Lin Z, et al.: National patterns of 
risk-standardized mortality and readmission for acute myocardial 
infarction and heart failure. Update on publicly reported outcomes 
measures based on the 2010 release. Circulation. Cardiovascular 
Quality & Outcomes. Sep 2010;3(5):459-467.
    \122\ Centers for Medicare and Medicaid Services. Medicare 
Hospital Quality Chartbook Performance Report on Outcome Measures 
September 2013. September 2013; http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/-Medicare-Hospital-Quality-Chartbook-2013.pdf.
    \123\ Rising KL, White LF, Fernandez WG, Boutwell AE.: Emergency 
Department Visits After Hospital Discharge: A Missing Part of the 
Equation. Annals of Emergency Medicine. 2013(0).
    \124\ Vashi AA, Fox JP, Carr BG, et al.: Use of hospital-based 
acute care among patients recently discharged from the hospital. 
JAMA: the journal of the American Medical Association. Jan 23 
2013;309(4):364-371.
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    In addition, over the past decade, the use of observation stays has 
rapidly increased. Specifically, between 2001 and 2008, the use of 
observation services increased nearly three-fold,\125\ and significant 
variation has been demonstrated in the use of observation services for 
conditions such as chest pain.\126\ These rising rates of observation 
stays among Medicare beneficiaries have gained the attention of 
patients, providers, and policymakers.\127\ For example, a report from 
OIG noted that in 2012, Medicare

[[Page 24575]]

beneficiaries had 1.5 million observation stays.\128\ Many of these 
observation stays lasted longer than the intended one day. This OIG 
report also noted the potential relationship between hospital use of 
observation stays as an alternative to short-stay inpatient 
hospitalizations as a response to changing hospital payment 
incentives.\129\
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    \125\ Venkatesh AK GB, Gibson Chambers JJ, Baugh CW, Bohan JS, 
Schuur JD.: Use of Observation Care in US Emergency Departments, 
2001 to 2008. PLoS One. September 2011;6(9):e24326.
    \126\ Schuur JD, Baugh CW, Hess EP, Hilton JA, Pines JM, Asplin 
BR.: Critical pathways for post-emergency outpatient diagnosis and 
treatment: tools to improve the value of emergency care. Academic 
Emergency Medicine. Jun 2011;18(6):e52-63.
    \127\ Feng Z, Wright B, Mor V.: Sharp rise in Medicare enrollees 
being held in hospitals for observation raises concerns about causes 
and consequences. Health Affairs. Jun 2012;31(6):1251-1259.
    \128\ Wright S.: Hospitals' Use of Observation Stays and Short 
Inpatient Stays for Medicare Beneficiaries, OEI-02-12-00040. 
Washington, DC: Department of Health and Human Services: Office of 
Inspector General July 29, 2013.
    \129\ Wright S.: Hospitals' Use of Observation Stays and Short 
Inpatient Stays for Medicare Beneficiaries, OEI-02-12-00040. 
Washington, DC: Department of Health and Human Services: Office of 
Inspector General July 29, 2013.
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    Thus, in the context of the previously adopted and publicly 
reported READM-30-AMI measure, the increasing use of ED visits and 
observation stays has raised concerns that the READM-30-AMI measure 
does not capture the full range of unplanned acute care in the post-
discharge period. In particular, there exists concern that high use of 
observation stays could in some cases replace readmissions, and 
hospitals with high rates of observation stays in the post-discharge 
period may therefore have low readmission rates that do not accurately 
reflect the quality of care.\130\
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    \130\ Carlson J.: Faulty Gauge? Readmissions are down, but 
observational-status patients are up and that could skew Medicare 
numbers. Modern Healthcare. June 8, 2013 2013.
---------------------------------------------------------------------------

    In response to these concerns, CMS improved on a previously 
existing non-Hospital IQR Program measure entitled ``30-Day Post-
Hospital AMI Discharge Care Transition Composite'' (NQF #0698). The 
improved measure (now called Excess Days in Acute Care after 
Hospitalization for Acute Myocardial Infarction) is a risk-adjusted 
outcome measure for AMI that incorporates the full range of acute care 
use that patients may experience post-discharge: Hospital readmissions, 
observation stays, and ED visits.
    The measure assesses all-cause acute care utilization for post-
discharge AMI patients for several reasons. First, from the patient 
perspective, acute care utilization for any cause is undesirable. It is 
costly, exposes patients to additional risks of medical care, 
interferes with work and family care, and imposes significant burden on 
caregivers. Second, limiting the measure to inpatient utilization may 
make it susceptible to gaming. Finally, it is often hard to exclude 
quality concerns and accountability based on the documented cause of a 
hospital visit. Therefore, this measure includes all-cause utilization.
    We are proposing to include this improved measure under the 
exception authority in section 1886(b)(3)(B)(IX)(bb) of the Act as 
previously discussed in section VIII.A.7. of the preamble of this 
proposed rule. We considered existing measures related to care 
transitions that have been endorsed by the NQF. Existing process 
measures capture many important domains of care transitions such as 
education, medication reconciliation and follow-up, but all require 
chart review and manual abstraction. Existing outcome measures are 
focused entirely on readmissions or complications and do not include 
observation stays or ED visits. We also are not aware of any other 
measures that assess the quality of transitional care by measuring 30-
day risk-standardized days in acute care (hospital readmissions, 
observation stays, and ED visits) following hospitalization for AMI 
that have been endorsed or adopted by a consensus organization, and 
found no other feasible and practical measures on this topic.
    The MAP conditionally supported this measure on the condition that 
this measure is reviewed by NQF and endorsed. We refer readers to the 
Spreadsheet of MAP 2015 Final Recommendations available at: http://www.qualityforum.org/map/, and note that in the document, this measure 
is entitled ``Hospital 30-day, all-cause, unplanned risk-standardized 
days in acute care following acute myocardial infarction (AMI) 
hospitalization.'' In particular, MAP members noted that the measure 
should be considered for SDS adjustment in the upcoming NQF trial 
period, reviewed for the empirical and conceptual relationship between 
SDS factors and risk-standardized days following acute care, and 
endorsed with appropriate consideration of SDS factors as determined by 
NQF standing committees. Some MAP members noted this measure could help 
address concerns about the growing use of observation stays. We note 
that this measure will be submitted to NQF with appropriate 
consideration for SDS, if required, for endorsement proceedings once an 
appropriate measure endorsement project has a call for measures.
(2) Overview of Measure
    This Excess Days in Acute Care after Hospitalization for AMI 
measure is a risk-standardized outcome measure that compares the number 
of days that patients are predicted to spend in acute care across the 
full spectrum of possible acute care events (hospital readmissions, 
observation stays, and ED visits) after discharge from a hospital for 
AMI, compared to the days expected based on their degree of illness.
(3) Data Sources
    The proposed measure is administrative claims-based and will use 3 
years of data. It uses Part A and Part B Medicare administrative claims 
data from Medicare FFS beneficiaries hospitalized for AMI.
(4) Outcome
    The outcome of the measure is the excess number of days patients 
spend in acute care (hospital readmissions, observation stays, and ED 
visits) per 100 discharges during the first 30 days after discharge 
from the hospital, relative to the number spent by the same patients 
discharged from an average hospital. The measure defines days in acute 
care as days spent: (1) In an ED, (2) admitted to observation status, 
or (3) admitted as an unplanned readmission for any cause within 30 
days from the date of discharge from the index AMI hospitalization. 
Readmission days are calculated as the discharge date minus the 
admission date. Admissions that extend beyond the 30-day follow-up 
period are truncated on day 30. Observation days are calculated by the 
hours in observation, rounded up to the nearest half day. On the advice 
of our TEP, an ED treat-and-release visit is counted as one half day. 
ED visits are not counted as a full day because the majority of treat-
and-release visits last fewer than 12 hours.
    ``Planned'' readmissions are those planned by providers for 
anticipated medical treatment or procedures that must be provided in 
the inpatient setting. This measure excludes planned readmissions using 
the planned readmission algorithm previously developed for the READM-
30-AMI measure. A more detailed discussion of exclusions follows below.
    The measure counts all use of acute care occurring in the 30-day 
post-discharge period. For example, if a patient returns to the ED 
three times, the measure counts each ED visit as a half-day. Similarly, 
if a patient has two hospitalizations within 30 days, the days spent in 
each are counted. We take this approach to capture the full patient 
experience of need for acute care in the post-discharge period.
(5) Cohort
    We defined the eligible cohort using the same criteria as the 
existing Hospital IQR Program measure, READM-30-AMI, except that this 
proposed measure does not include patients admitted to Veterans 
Administration hospitals. That

[[Page 24576]]

is, the cohort includes Medicare FFS patients aged 65 years or older: 
(1) With a principal discharge diagnosis of AMI; (2) enrolled in Part A 
and Part B Medicare for the 12 months prior to the date of admission, 
and enrolled in Part A during the index admission; (3) who were 
discharged from a non-Federal acute care hospital; (4) who were not 
transferred to another acute care facility; and (5) were alive at 
discharge. We defined the cohorts using the following ICD-9-CM 
diagnosis codes identified in inpatient claims data:
     410.00 (Acute myocardial infarction of anterolateral wall, 
episode of care unspecified);
     410.01 (Acute myocardial infarction of anterolateral wall, 
initial episode of care);
     410.10 (Acute myocardial infarction of other anterior 
wall, episode of care unspecified);
     410.11 (Acute myocardial infarction of other anterior 
wall, initial episode of care);
     410.20 (Acute myocardial infarction of inferolateral wall, 
episode of care unspecified);
     410.21 (Acute myocardial infarction of inferolateral wall, 
initial episode of care);
     410.30 (Acute myocardial infarction of inferoposterior 
wall, episode of care unspecified);
     410.31 (Acute myocardial infarction of inferoposterior 
wall, initial episode of care);
     410.40 (Acute myocardial infarction of other inferior 
wall, episode of care unspecified);
     410.41 (Acute myocardial infarction of other inferior 
wall, initial episode of care);
     410.50 (Acute myocardial infarction of other lateral wall, 
episode of care unspecified);
     410.51 (Acute myocardial infarction of other lateral wall, 
initial episode of care);
     410.60 (True posterior wall infarction, episode of care 
unspecified);
     410.61 (True posterior wall infarction, initial episode of 
care);
     410.70 (Subendocardial infarction, episode of care 
unspecified);
     410.71 (Subendocardial infarction, initial episode of 
care);
     410.80 (Acute myocardial infarction of other specified 
sites, episode of care unspecified);
     410.81 (Acute myocardial infarction of other specified 
sites, initial episode of care);
     410.90 (Acute myocardial infarction of unspecified site, 
episode of care unspecified);
     410.91 (Acute myocardial infarction of unspecified site, 
initial episode of care).
(6) Exclusion Criteria
    The measure excludes the following admissions from the measure 
cohort: (1) Hospitalizations without at least 30 days of post-discharge 
enrollment in Part A and Part B FFS Medicare because the 30-day outcome 
cannot be assessed in this group since claims data are used to 
determine whether a patient was readmitted, was placed under 
observation, or visited the ED; (2) discharged against medical advice 
(AMA) because providers did not have the opportunity to deliver full 
care and prepare the patient for discharge; (3) hospitalizations for 
patients admitted and discharged on the same day (and not transferred 
or deceased) because these patients likely did not suffer clinically 
significant AMI; and (4) hospitalizations for patients with an index 
admission within 30 days of a previous index admission because 
additional AMI admissions within 30 days are part of the outcome, and 
we choose not to count a single admission both as an index admission 
and a readmission for another index admission.
(7) Risk-Adjustment
    The measure adjusts for variables that are clinically relevant and 
have strong relationships with the outcome. The measure seeks to adjust 
for case-mix differences among hospitals based on the clinical status 
of the patient at the time of the index admission. Accordingly, only 
comorbidities that convey information about the patient at that time or 
in the 12 months prior, and not complications that arise during the 
course of the index hospitalization, are included in the risk 
adjustment. The measure does not adjust for patients' admission source 
or their discharge disposition (for example, skilled nursing facility) 
because these factors are associated with the structure of the 
healthcare system, not solely patients' clinical comorbidities. 
Regional differences in the availability of post-acute care providers 
and practice patterns might exert undue influence on model results. In 
addition, these data fields are not audited and are not as reliable as 
diagnosis codes.
    The outcome is risk adjusted using a two-part random effects model. 
This statistical model, often referred to as a ``hurdle'' model, 
accounts for the structure of the data (patients clustered within 
hospitals) and the observed distribution of the outcome. Specifically, 
it models the number of acute care days for each patient as: (a) A 
probability that they have a non-zero number of days; and (b) a number 
of days, given that this number is non-zero. The first part is 
specified as a logit model, and the second part is specified as a 
Poisson model, with both parts having the same risk-adjustment 
variables and each part having a random effect. This is an accepted 
statistical method that explicitly estimates how much of the variation 
in acute care days is accounted for by patient risk factors, how much 
by the hospital where the patient is treated, and how much is explained 
by neither. This model is used to calculate the predicted (including 
random effects) and expected (assuming random effects are zero) number 
of days for each patient, and the average difference between these for 
each hospital is used to construct the risk-standardized Excess Acute 
Care Days.
(8) Calculating Excess Acute Care Days (EACDs)
    The EACD is calculated as the difference between the average of the 
predicted number of days spent in acute care for patients discharged 
from each hospital and the average number of days that would have been 
expected if those patients had been cared for at an average hospital, 
and then the difference is multiplied by 100 so that EACD represents 
EACD per 100 discharges. We multiply the final measure by 100 to be 
consistent with the reporting of the existing READM-30-AMI measure. A 
positive result indicates that patients spend more days in acute care 
post-discharge than expected; a negative result indicates that patients 
spend fewer days in acute care than expected.
    We are inviting public comment on our proposal to adopt the Excess 
Days in Acute Care after Hospitalization for Acute Myocardial 
Infarction measure for the FY 2018 payment determination and subsequent 
years.
e. Excess Days in Acute Care After Hospitalization for Heart Failure
(1) Background
    Heart failure is a priority area for outcomes measurement because 
it is a common condition associated with considerable morbidity, 
mortality, and healthcare spending. Heart failure was the second most 
common principal discharge diagnosis among patients with Medicare in 
2012.\131\ Heart failure also accounts for a large fraction of 
hospitalization costs, and it was the

[[Page 24577]]

third most expensive condition billed to Medicare in 2011.\132\
---------------------------------------------------------------------------

    \131\ Agency for Healthcare Research and Quality (AHRQ). 
Healthcare Cost and Utilization Project (HCUP) http://hcupnet.ahrq.gov/.
    \132\ Torio CM, Andrews RM. National Inpatient Hospital Costs: 
The Most Expensive Conditions by Payer, 2011. HCUP Statistical Brief 
#160. 2013; Available at: http://www.hcup-us.ahrq.gov/reports/statbriefs/sb160.jsp.
---------------------------------------------------------------------------

    Some of the costs for heart failure can be attributed to high acute 
care utilization for post-discharge heart failure patients in the form 
of readmissions, observation stays, and ED visits. Patients admitted 
for heart failure have disproportionately high readmission rates. 
Readmission rates following discharge for heart failure are highly 
variable across hospitals in the United States.133 134 For 
the previously adopted Hospital IQR Program measure, Hospital 30-Day 
All-Cause Risk-Standardized Readmission Rate (RSRR) following Heart 
Failure Hospitalization (NQF #0330) (READM-30-HF) (73 FR 46806 through 
48610), publicly reported 30-day risk-standardized readmission rates 
for heart failure ranged from 17.5 percent to 30.3 percent for the time 
period between July 2011 and June 2012.\135\ However, patients are not 
only at risk of requiring readmission in the post-discharge period. ED 
visits represent a significant proportion of post-discharge acute care 
utilization. Two recent studies conducted in patients of all ages have 
shown that 9.5 percent of patients return to the ED within 30 days of 
hospital discharge and that about 12 percent of these patients are 
discharged from the ED and are not captured by the previously adopted 
Hospital IQR Program READM-30-HF measure.136 137 Patients 
returning to the ED after heart failure hospitalization most commonly 
return for heart failure recurrence and chest pain.\138\
---------------------------------------------------------------------------

    \133\ Krumholz HM, Merrill AR, Schone EM, et al.: Patterns of 
hospital performance in acute myocardial infarction and heart 
failure 30-day mortality and readmission. Circulation. 
Cardiovascular Quality & Outcomes. Sep 2009;2(5):407-413.
    \134\ Bernheim SM, Grady JN, Lin Z, et al.: National patterns of 
risk-standardized mortality and readmission for acute myocardial 
infarction and heart failure. Update on publicly reported outcomes 
measures based on the 2010 release. Circulation. Cardiovascular 
Quality & Outcomes. Sep 2010;3(5):459-467.
    \135\ Centers for Medicare and Medicaid Services. Medicare 
Hospital Quality Chartbook Performance Report on Outcome Measures 
September 2013. September 2013; Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Downloads/-Medicare-Hospital-Quality-Chartbook-2013.pdf.
    \136\ Rising KL, White LF, Fernandez WG, Boutwell AE.: Emergency 
Department Visits After Hospital Discharge: A Missing Part of the 
Equation. Annals of Emergency Medicine. 2013(0).
    \137\ Vashi AA, Fox JP, Carr BG, et al.: Use of hospital-based 
acute care among patients recently discharged from the hospital. 
JAMA: the journal of the American Medical Association. Jan 23 
2013;309(4):364-371.
    \138\ Vashi AA, Fox JP, Carr BG, et al.: Use of hospital-based 
acute care among patients recently discharged from the hospital. 
JAMA:The journal of the American Medical Association. Jan 23 
2013;309(4):364-371.
---------------------------------------------------------------------------

    In addition, over the past decade, the use of observation stays has 
rapidly increased. Specifically, between 2001 and 2008, the use of 
observation services increased nearly three-fold,\139\ and significant 
variation has been demonstrated in the use of observation services for 
conditions such as chest pain.\140\ These rising rates of observation 
stays among Medicare beneficiaries have gained the attention of 
patients, providers, and policymakers.141 142 143 For 
example, a report from the OIG noted that in 2012, Medicare 
beneficiaries had 1.5 million observation stays.\144\ Many of these 
observation stays lasted longer than the intended one day. The OIG 
report also noted the potential relationship between hospital use of 
observation stays as an alternative to short-stay inpatient 
hospitalizations as a response to changing hospital payment incentives.
---------------------------------------------------------------------------

    \139\ Venkatesh AK GB, Gibson Chambers JJ, Baugh CW, Bohan JS, 
Schuur JD.: Use of Observation Care in US Emergency Departments, 
2001 to 2008. PLoS One. September 2011;6(9):e24326.
    \140\ Schuur JD, Baugh CW, Hess EP, Hilton JA, Pines JM, Asplin 
BR.: Critical pathways for post-emergency outpatient diagnosis and 
treatment: tools to improve the value of emergency care. Academic 
Emergency Medicine. Jun 2011;18(6):e52-63.
    \141\ Rising KL, White LF, Fernandez WG, Boutwell AE.: Emergency 
Department Visits After Hospital Discharge: A Missing Part of the 
Equation. Annals of Emergency Medicine. 2013(0).
    \142\ Vashi AA, Fox JP, Carr BG, et al.: Use of hospital-based 
acute care among patients recently discharged from the hospital. 
JAMA: The Journal of the American Medical Association. Jan 23 
2013;309(4):364-371.
    \143\ Feng Z, Wright B, Mor V.: Sharp rise in Medicare enrollees 
being held in hospitals for observation raises concerns about causes 
and consequences. Health Affairs. Jun 2012;31(6):1251-1259.
    \144\ Wright S.: Hospitals' Use of Observation Stays and Short 
Inpatient Stays for Medicare Beneficiaries, OEI-02-12-00040. 
Washington, DC: Department of Health and Human Services: Office of 
Inspector General July 29, 2013.
---------------------------------------------------------------------------

    Thus, in the context of the currently adopted and publicly reported 
Hospital IQR Program READM-30-HF measure, the increasing use of ED 
visits and observation stays has raised concerns that the READM-30-HF 
measure does not capture the full range of unplanned acute care in the 
post-discharge period. In particular, there exists concern that high 
use of observation stays could in some cases replace readmissions, and 
hospitals with high rates of observation stays in the post-discharge 
period may therefore have low readmission rates that do not accurately 
reflect the quality of care.\145\
---------------------------------------------------------------------------

    \145\ Carlson J.: Faulty Gauge? Readmissions are down, but 
observational-status patients are up and that could skew Medicare 
numbers. Modern Healthcare. June 8, 2013 2013.
---------------------------------------------------------------------------

    In response to these concerns, we improved on an existing non-
Hospital IQR Program measure entitled ``30-Day Post-Hospital HF 
Discharge Care Transition Composite'' (NQF #0699). The improved measure 
(now called Excess Days in Acute Care after Hospitalization for Heart 
Failure) is a risk-adjusted outcome measure for heart failure that 
incorporates the full range of acute care use that patients may 
experience post-discharge: hospital readmissions, observation stays, 
and ED visits.
    The measure assesses all-cause acute care utilization for post-
discharge heart failure patients for several reasons. First, from the 
patient perspective, acute care utilization for any cause is 
undesirable. It is costly, exposes patients to additional risks of 
medical care, interferes with work and family care, and imposes 
significant burden on caregivers. Second, limiting the measure to 
inpatient utilization may make it susceptible to gaming. Finally, it is 
often hard to exclude quality concerns and accountability based on the 
documented cause of a hospital visit. Therefore, this measure includes 
all-cause utilization.
    We are proposing this improved measure in the Hospital IQR Program 
under the exception authority in section 1886(b)(3)(B)(IX)(bb) of the 
Act as previously discussed in section VIII.A.7. of the preamble of 
this proposed rule. We considered other existing measures related to 
care transitions that have been endorsed by the NQF. Existing process 
measures capture many important domains of care transitions such as 
education, medication reconciliation and follow-up, but all require 
chart review and manual abstraction. Existing outcome measures are 
focused entirely on readmissions or complications and do not include 
observation stays or ED visits. We also are not aware of any other 
measures that assess the quality of transitional care by measuring 30-
day risk-standardized days in acute care (hospital readmissions, 
observation stays and ED visits) following hospitalization for heart 
failure that have been endorsed or adopted by a consensus organization, 
and found no other feasible and practical measures on this topic.
    The MAP conditionally supported this measure on the condition that 
it is reviewed by NQF and endorsed. We note that this measure was 
entitled

[[Page 24578]]

``Hospital 30-day, all-cause, unplanned risk-standardized days in acute 
care following heart failure hospitalization,'' in the MAP Spreadsheet. 
In particular, MAP members noted that the measure should be considered 
for SDS adjustment in the upcoming NQF trial period, reviewed for the 
empirical and conceptual relationship between SDS factors and risk-
standardized days following acute care, and endorsed with appropriate 
consideration of SDS factors as determined by NQF standing committees. 
Some MAP members noted this measure could help address concerns about 
the growing use of observation stays. We note that this measure will be 
submitted to NQF with appropriate consideration for SDS, if required, 
for endorsement proceedings once an appropriate measure endorsement 
project has a call for measures.
(2) Overview of Measure
    This Excess Days in Acute Care after Hospitalization for Heart 
Failure measure is a risk-standardized outcome measure that compares 
the number of days that patients are predicted to spend in acute care 
across the full spectrum of possible acute care events (hospital 
readmissions, observation stays, and ED visits) after discharge from a 
hospital for heart failure, compared to the days expected at an average 
hospital, based on their degree of illness.
(3) Data Sources
    The proposed measure is administrative claims-based and will use 3 
years of data. It uses Part A and Part B Medicare administrative claims 
data from Medicare FFS beneficiaries hospitalized for heart failure.
(4) Outcome
    The outcome of the measure is the excess number of days patients 
spend in acute care (hospital readmissions, observation stays, and ED 
visits) per 100 discharges during the first 30 days after discharge 
from the hospital, relative to the number spent by the same patients 
discharged from an average hospital. The measure defines days in acute 
care as days spent: (1) In an ED, (2) admitted to observation status, 
or (3) admitted as an unplanned readmission for any cause within 30 
days from the date of discharge from the index heart failure 
hospitalization. Readmission days are calculated as the discharge date 
minus the admission date. Admissions that extend beyond the 30-day 
follow-up period are truncated on day 30. Observation days are 
calculated by the hours in observation, rounded up to the nearest half 
day. On the advice of our TEP, an ED treat-and-release visit is counted 
as one half day. ED visits are not counted as a full day because the 
majority of treat-and-release visits last fewer than 12 hours.
    ``Planned'' readmissions are those planned by providers for 
anticipated medical treatment or procedures that must be provided in 
the inpatient setting. This measure excludes planned readmissions using 
the planned readmission algorithm (78 FR 50786 through 50787), a set of 
criteria for classifying readmissions that are likely to be planned 
among the general Medicare population using Medicare claims data, 
previously developed for Hospital IQR Program 30-day readmission 
measures, including the previously adopted READM-30-HF measure.
    The measure counts all use of acute care occurring in the 30-day 
post-discharge period. For example, if a patient returns to the ED 
three times, the measure counts each ED visit as a half-day. Similarly, 
if a patient has two hospitalizations within 30 days, the days spent in 
each are counted. We take this approach to capture the full patient 
experience of need for acute care in the post-discharge period.
(5) Cohort
    We defined the eligible cohort using the same criteria as the 
previously adopted Hospital IQR Program READM-30-HF measure (73 FR 
46806 through 48610). The READM-30-HF cohort criteria are included in a 
report posted on our Measure Methodology Web page, under the 
``Downloads'' section in the ``AMI, HF, PN, COPD, and Stroke 
Readmission Updates'' zip file on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. This measure differs 
from the READM-30-HF measure cohort in that this measure does not 
include patients admitted to Veterans Administration hospitals. That 
is, the cohort includes Medicare FFS patients aged 65 years or older: 
(1) With a principal discharge diagnosis of heart failure; (2) enrolled 
in Part A and Part B Medicare for the 12 months prior to the date of 
admission, and enrolled in Part A during the index admission; (3) who 
were discharged from a non-Federal acute care hospital; (4) who were 
not transferred to another acute care facility; and (5) were alive at 
discharge. We defined the cohorts using the following ICD-9-CM 
diagnosis codes identified in inpatient claims data:
     402.01 (Malignant hypertensive heart disease with heart 
failure);
     402.11 (Benign hypertensive heart disease with heart 
failure);
     402.91 (Unspecified hypertensive heart disease with heart 
failure);
     404.01 (Hypertensive heart and chronic kidney disease, 
malignant, with heart failure and with chronic kidney disease stage I 
through stage IV, or unspecified);
     404.03 (Hypertensive heart and chronic kidney disease, 
malignant, with heart failure and with chronic kidney disease stage V 
or end stage renal disease);
     04.11 (Hypertensive heart and chronic kidney disease, 
benign, with heart failure and with chronic kidney disease stage I 
through stage IV, or unspecified);
     404.13 (Hypertensive heart and chronic kidney disease, 
benign, with heart failure and chronic kidney disease stage V or end 
stage renal disease);
     404.91 (Hypertensive heart and chronic kidney disease, 
unspecified, with heart failure and with chronic kidney disease stage I 
through stage IV, or unspecified);
     404.93 (Hypertensive heart and chronic kidney disease, 
unspecified, with heart failure and chronic kidney disease stage V or 
end stage renal disease);
     428.0 (Congestive heart failure, unspecified);
     428.1 (Left heart failure);
     428.20 (Systolic heart failure, unspecified);
     428.21 (Acute systolic heart failure);
     428.22 (Chronic systolic heart failure);
     428.23 (Acute on chronic systolic heart failure);
     428.30 (Diastolic heart failure, unspecified);
     428.31 (Acute diastolic heart failure);
     428.32 (Chronic diastolic heart failure);
     428.33 (Acute on chronic diastolic heart failure)
     428.40 (Combined systolic and diastolic heart failure, 
unspecified);
     428.41 (Acute combined systolic and diastolic heart 
failure);
     428.42 (Chronic combined systolic and diastolic heart 
failure);
     428.43 (Acute on chronic combined systolic and diastolic 
heart failure);
     428.9 (Heart failure, unspecified).
(6) Exclusion Criteria
    The measure excludes the following admissions from the measure 
cohort: (1) Hospitalizations without at least 30 days of post-discharge 
enrollment in Part A and Part B FFS Medicare because the

[[Page 24579]]

30-day outcome cannot be assessed in this group because claims data are 
used to determine whether a patient was readmitted, was placed under 
observation, or visited the ED; (2) discharged against medical advice 
(AMA) because providers did not have the opportunity to deliver full 
care and prepare the patient for discharge; and (3) hospitalizations 
for patients with an index admission within 30 days of a previous index 
admission because additional heart failure admissions within 30 days 
are part of the outcome, and we choose not to count a single admission 
both as an index admission and a readmission for another index 
admission.
(7) Risk-Adjustment
    The measure adjusts for variables that are clinically relevant and 
have strong relationships with the outcome. The measure seeks to adjust 
for case-mix differences among hospitals based on the clinical status 
of the patient at the time of the index admission. Accordingly, only 
comorbidities that convey information about the patient at that time or 
in the 12 months prior, and not complications that arise during the 
course of the index hospitalization, are included in the risk 
adjustment. The measure does not adjust for patients' admission source 
or their discharge disposition (for example, skilled nursing facility) 
because these factors are associated with the structure of the health 
care system, not solely patients' clinical comorbidities. Regional 
differences in the availability of post-acute care providers and 
practice patterns might exert undue influence on model results. In 
addition, these data fields are not audited and are not as reliable as 
diagnosis codes.
    The outcome is risk adjusted using a two-part random effects model. 
This statistical model, often referred to as a ``hurdle'' model, 
accounts for the structure of the data (patients clustered within 
hospitals) and the observed distribution of the outcome. Specifically, 
it models the number of acute care days for each patient as: (a) A 
probability that they have a non-zero number of days and (b) a number 
of days, given that this number is non-zero. The first part is 
specified as a logit model, and the second part is specified as a 
Poisson model, with both parts having the same risk-adjustment 
variables and each part having a random effect. This is an accepted 
statistical method that explicitly estimates how much of the variation 
in acute care days is accounted for by patient risk factors, how much 
by the hospital where the patient is treated, and how much is explained 
by neither. This model is used to calculate the predicted (including 
random effects) and expected (assuming random effects are zero) number 
of days for each patient, and the average difference between these for 
each hospital is used to construct the risk-standardized Excess Acute 
Care Days.
(8) Calculating Excess Acute Care Days (EACDs)
    The EACD is calculated as the difference between the average of the 
predicted number of days spent in acute care for patients discharged 
from each hospital and the average number of days that would have been 
expected if those patients had been cared for at an average hospital, 
and then the difference is multiplied by 100 so that EACD represents 
EACD per 100 discharges. We multiply the final measure by 100 to be 
consistent with the reporting of the existing READM-30-HF measure. A 
positive result indicates that patients spend more days in acute care 
post-discharge than expected; a negative result indicates that patients 
spend fewer days in acute care than expected.
    We are inviting public comment on our proposal to adopt the Excess 
Days in Acute Care after Hospitalization for Heart Failure measure for 
the FY 2018 payment determination and subsequent years.
f. Summary of Previously Adopted and Proposed Hospital IQR Program 
Measure Set for the FY 2018 Payment Determination and Subsequent Years
    The table below outlines the Hospital IQR Program measure set for 
the FY 2018 payment determination and subsequent years and includes 
both previously adopted and proposed measures.

 Hospital IQR Program Measures for the FY 2018 Payment Determination and
                            Subsequent Years
------------------------------------------------------------------------
          Short name                    Measure name             NQF #
------------------------------------------------------------------------
                                  NHSN
------------------------------------------------------------------------
CLABSI.......................  National Healthcare Safety           0139
                                Network (NHSN) Central Line-
                                Associated Bloodstream
                                Infection (CLABSI) Outcome
                                Measure.
Colon and Abdominal            American College of Surgeons--       0753
 Hysterectomy SSI.              Centers for Disease Control
                                and Prevention (ACS-CDC)
                                Harmonized Procedure Specific
                                Surgical Site Infection (SSI)
                                Outcome Measure
                                Colon Procedures.....
                                Hysterectomy
                                Procedures..
CAUTI........................  National Healthcare Safety           0138
                                Network (NHSN) Catheter-
                                associated Urinary Tract
                                Infection (CAUTI) Outcome
                                Measure.
MRSA Bacteremia..............  National Healthcare Safety           1716
                                Network (NHSN) Facility-wide
                                Inpatient Hospital-onset
                                Methicillin-resistant
                                Staphylococcus aureus (MRSA)
                                Bacteremia Outcome Measure.
CDI..........................  National Healthcare Safety           1717
                                Network (NHSN) Facility-wide
                                Inpatient Hospital-onset
                                Clostridium difficile
                                Infection (CDI) Outcome
                                Measure.
HCP..........................  Influenza Vaccination Coverage       0431
                                Among Healthcare Personnel.
------------------------------------------------------------------------
                            Chart-abstracted
------------------------------------------------------------------------
ED-1 *.......................  Median Time from ED Arrival to       0495
                                ED Departure for Admitted ED
                                Patients.
ED-2 *.......................  Admit Decision Time to ED            0497
                                Departure Time for Admitted
                                Patients.
Imm-2........................  Influenza Immunization........       1659
PC-01 *......................  Elective Delivery (Collected         0469
                                in aggregate, submitted via
                                Web-based tool or electronic
                                clinical quality measure).
Sepsis.......................  Severe Sepsis and Septic             0500
                                Shock: Management Bundle
                                (Composite Measure).
STK-04 *.....................  Thrombolytic Therapy..........       0437
VTE-5 *......................  Venous Thromboembolism                N/A
                                Discharge Instructions.
VTE-6 *......................  Incidence of Potentially              N/A
                                Preventable Venous
                                Thromboembolism.
------------------------------------------------------------------------

[[Page 24580]]

 
                                 Claims
------------------------------------------------------------------------
MORT-30-AMI..................  Hospital 30-Day, All-Cause,          0230
                                Risk-Standardized Mortality
                                Rate (RSMR) Following Acute
                                Myocardial Infarction (AMI)
                                Hospitalization.
MORT-30-HF...................  Hospital 30-Day, All-Cause,          0229
                                Risk-Standardized Mortality
                                Rate (RSMR) Following Heart
                                Failure (HF) Hospitalization.
MORT-30-PN...................  Hospital 30-Day, All-Cause,          0468
                                Risk-Standardized Mortality
                                Rate Following Pneumonia
                                Hospitalization.
MORT-30-COPD.................  Hospital 30-Day, All-Cause,          1893
                                Risk-Standardized Mortality
                                Rate (RSMR) Following Chronic
                                Obstructive Pulmonary Disease
                                (COPD) Hospitalization.
STK Mortality................  Stroke 30-day Mortality Rate..        N/A
CABG Mortality...............  Hospital 30-Day, All-Cause,          2558
                                Risk-Standardized Mortality
                                Rate (RSMR) Following
                                Coronary Artery Bypass Graft
                                (CABG) Surgery.
READM-30-AMI.................  Hospital 30-Day All-Cause Risk-      0505
                                Standardized Readmission Rate
                                (RSRR) Following Acute
                                Myocardial Infarction (AMI)
                                Hospitalization.
READM-30-HF..................  Hospital 30-Day, All-Cause,          0330
                                Risk-Standardized Readmission
                                Rate (RSRR) Following Heart
                                Failure (HF) Hospitalization.
READM-30-PN..................  Hospital 30-Day, All-Cause,          0506
                                Risk-Standardized Readmission
                                Rate (RSRR) Following
                                Pneumonia Hospitalization.
READM-30-THA/TKA.............  Hospital-Level 30-Day, All-          1551
                                Cause Risk-Standardized
                                Readmission Rate (RSRR)
                                Following Elective Primary
                                Total Hip Arthroplasty (THA)
                                and/or Total Knee
                                Arthroplasty (TKA).
READM-30-HWR.................  Hospital-Wide All-Cause              1789
                                Unplanned Readmission Measure
                                (HWR).
COPD READMIT.................  Hospital 30-Day, All-Cause,          1891
                                Risk-Standardized Readmission
                                Rate (RSRR) Following Chronic
                                Obstructive Pulmonary Disease
                                (COPD) Hospitalization.
STK READMIT..................  30-Day Risk Standardized              N/A
                                Readmission Rate Following
                                Stroke Hospitalization.
CABG READMIT.................  Hospital 30-Day, All-Cause,          2515
                                Unplanned, Risk-Standardized
                                Readmission Rate (RSRR)
                                Following Coronary Artery
                                Bypass Graft (CABG) Surgery.
MSPB.........................  Payment-Standardized Medicare        2158
                                Spending Per Beneficiary
                                (MSPB).
AMI Payment..................  Hospital-Level, Risk-                2431
                                Standardized Payment
                                Associated with a 30-Day
                                Episode-of-Care for Acute
                                Myocardial Infarction (AMI).
HF Payment...................  Hospital-Level, Risk-                2436
                                Standardized Payment
                                Associated with a 30-Day
                                Episode-of-Care For Heart
                                Failure (HF).
PN Payment...................  Hospital-Level, Risk-                2579
                                Standardized Payment
                                Associated with a 30-day
                                Episode-of-Care For Pneumonia.
Hip/knee complications.......  Hospital-Level Risk-                 1550
                                Standardized Complication
                                Rate (RSCR) Following
                                Elective Primary Total Hip
                                Arthroplasty (THA) and/or
                                Total Knee Arthroplasty (TKA).
PSI 4 (PSI/NSI)..............  Death among Surgical                 0351
                                Inpatients with Serious,
                                Treatable Complications.
PSI 90.......................  Patient Safety for Selected          0531
                                Indicators (Composite
                                Measure).
THA/TKA Payment **...........  Hospital[hyphen]Level,                N/A
                                Risk[hyphen]Standardized
                                Payment Associated with an
                                Episode-of-Care for Primary
                                Elective Total Hip
                                Arthroplasty and/or Total
                                Knee Arthroplasty.
Kidney/UTI Payment **........  Kidney/Urinary Tract Infection        N/A
                                Clinical Episode-Based
                                Payment Measure.
Spine Fusion/Refusion Payment  Spine Fusion/Refusion Clinical        N/A
 **.                            Episode-Based Payment Measure.
Cellulitis Payment **........  Cellulitis Clinical Episode-          N/A
                                Based Payment Measure.
GI Payment **................  Gastrointestinal Hemorrhage           N/A
                                Clinical Episode-Based
                                Payment Measure.
AMI Excess Days **...........  Excess Days in Acute Care             N/A
                                after Hospitalization for
                                Acute Myocardial Infarction.
HF Excess Days **............  Excess Days in Acute Care             N/A
                                after Hospitalization for
                                Heart Failure.
------------------------------------------------------------------------
                   Electronic Clinical Quality Measure
------------------------------------------------------------------------
AMI-2........................  Aspirin Prescribed at                0142
                                Discharge for AMI.
AMI-7a.......................  Fibrinolytic Therapy Received        0164
                                Within 30 Minutes of Hospital
                                Arrival.
AMI-8a.......................  Primary PCI Received Within 90       0163
                                Minutes of Hospital Arrival.
AMI-10.......................  Statin Prescribed at Discharge        N/A
CAC-3........................  Home Management Plan of Care          N/A
                                Document Given to Patient/
                                Caregiver.
ED-1 *.......................  Median Time from ED Arrival to       0495
                                ED Departure for Admitted ED
                                Patients.
ED-2 *.......................  Admit Decision Time to ED            0497
                                Departure Time for Admitted
                                Patients.
EHDI-1a......................  Hearing Screening Prior to           1354
                                Hospital Discharge.
HTN..........................  Healthy Term Newborn..........       0716
PC-01 *......................  Elective Delivery (Collected         0469
                                in aggregate, submitted via
                                Web-based tool or electronic
                                clinical quality measure).
PC-05........................  Exclusive Breast Milk Feeding        0480
                                and the Subset Measure PC-05a
                                Exclusive Breast Milk Feeding
                                Considering Mother's Choice.
PN-6.........................  Initial Antibiotic Selection         0147
                                for Community-Acquired
                                Pneumonia (CAP) in
                                Immunocompetent Patients.
SCIP-Inf-1a..................  Prophylactic Antibiotic              0527
                                Received Within One Hour
                                Prior to Surgical Incision.
SCIP-Inf-2a..................  Prophylactic Antibiotic              0528
                                Selection for Surgical
                                Patients.
SCIP-Inf-9...................  Urinary catheter Removed on           N/A
                                Postoperative Day 1 (POD 1)
                                or Postoperative Day 2 (POD
                                2) with Day of Surgery Being
                                Day Zero.
STK-02.......................  Discharged on Antithrombotic         0435
                                Therapy.
STK-03.......................  Anticoagulation Therapy for          0436
                                Atrial Fibrillation/Flutter.
STK-04 *.....................  Thrombolytic Therapy..........       0437

[[Page 24581]]

 
STK-05.......................  Antithrombotic Therapy by the        0438
                                End of Hospital Day Two.
STK-06.......................  Discharged on Statin                 0439
                                Medication.
STK-08.......................  Stroke Education..............        N/A
STK-10.......................  Assessed for Rehabilitation...       0441
VTE-1........................  Venous Thromboembolism               0371
                                Prophylaxis.
VTE-2........................  Intensive Care Unit Venous           0372
                                Thromboembolism Prophylaxis.
VTE-3........................  Venous Thromboembolism               0373
                                Patients with Anticoagulation
                                Overlap Therapy.
VTE-4........................  Venous Thromboembolism                N/A
                                Patients Receiving
                                Unfractionated Heparin with
                                Dosages/Platelet Count
                                Monitoring by Protocol or
                                Nomogram.
VTE-5 *......................  Venous Thromboembolism                N/A
                                Discharge Instructions.
VTE-6 *......................  Incidence of Potentially              N/A
                                Preventable Venous
                                Thromboembolism.
------------------------------------------------------------------------
                             Patient Survey
------------------------------------------------------------------------
HCAHPS.......................  HCAHPS + 3-Item Care                 0166
                                Transition Measure                  0228
                                (CTM[dash]3).
------------------------------------------------------------------------
                               Structural
------------------------------------------------------------------------
Patient Safety Culture **....  Hospital Survey on Patient            N/A
                                Safety Culture.
Registry for Nursing           Participation in a Systematic         N/A
 Sensitive Care.                Clinical Database Registry
                                for Nursing Sensitive Care.
Registry for General Surgery.  Participation in a Systematic         N/A
                                Clinical Database Registry
                                for Registry for General
                                Surgery.
Safe Surgery Checklist.......  Safe Surgery Checklist Use....        N/A
------------------------------------------------------------------------
* Measure is listed twice, as both chart-abstracted and electronic
  clinical quality measure.
** Measures we are proposing beginning with FY 2018 and for subsequent
  years.

8. Electronic Clinical Quality Measures
    In this proposed rule, we are clarifying our policy for one 
previously adopted voluntarily reported electronic clinical quality 
measure for the FY 2017 payment determination. Specifically, we are 
clarifying our requirements for the submission of STK-01 for CY 2015/FY 
2017 payment determination. In addition, we are proposing to expand our 
electronic clinical quality measure policy in order to make reporting 
of electronic clinical quality measures required for the FY 2018 
payment determination and subsequent years.
a. Previously Adopted Voluntarily Reported Electronic Clinical Quality 
Measures for the FY 2017 Payment Determination
    For a discussion of our previously finalized electronic clinical 
quality measures and policies, we refer readers to the FY 2014 IPPS/
LTCH PPS final rule (78 FR 50811 through 50819), and the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50241 through 50253; 50256 through 50259; 
and 50273 through 50276).
b. Clarification for the Venous Thromboembolism (VTE) Prophylaxis (STK-
01) Measure (NQF #0434)
    In this proposed rule, we are proposing to clarify reporting 
requirements for the Venous Thromboembolism (VTE) Prophylaxis (STK-01) 
Measure (NQF #0434). In the FY 2016 IPPS/LTCH PPS final rule (78 FR 
50808), we stated that hospitals need not report the STK-01 measure as 
part of the STK measure set if reporting electronically, because no 
electronic specification existed for STK-01. In other words, hospitals 
that successfully submit STK-02, STK-03, STK-04, STK-05, STK-06, STK-
08, and STK-10 as electronic clinical quality measures are not required 
to also chart-abstract and submit STK-01 in order to meet Hospital IQR 
Program requirements for the FY 2016 payment determination. However, 
hospitals that do not submit the specified electronic clinical quality 
measures must continue to chart-abstract and submit STK-01 as 
previously required. To review the details in the 2014 IPPS/LTCH PPS 
final rule, we refer readers to our Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY-2014-IPPS-Final-Rule-Home-Page-Items/FY-2014-IPPS-Final-Rule-CMS-1599-F-Regulations.html.
    We are clarifying that this policy continues for the CY 2015/FY 
2017 payment determination. Hospitals that chose to submit the STK-02, 
STK-03, STK-04, STK-05, STK-06, STK-08, and STK-10 as electronic 
clinical quality measures are not required to also chart-abstract and 
submit STK-01 in order to meet Hospital IQR Program requirements for 
the FY 2017 payment determination. However, hospitals that do not 
submit the specified electronic clinical quality measures must continue 
to chart-abstract and submit STK-01 as previously required. We note 
that STK-01 is proposed for removal for CY 2016/FY 2018 payment 
determination and refer readers to section VIII.A.3.b. of the preamble 
of this proposed rule for more details.
    We are inviting public comment on this proposal.
c. Proposed Requirements for Hospitals To Report Electronic Clinical 
Quality Measures for the FY 2018 Payment Determination and Subsequent 
Years
    In this proposed rule, we are proposing to expand our electronic 
clinical quality measure policy in order to make reporting of 
electronic clinical quality measures required, rather than voluntary, 
under the Hospital IQR Program. Specifically, we are proposing that, 
beginning in CY 2016/FY 2018 payment determination and subsequent 
years, we will require hospitals to select and submit 16 electronic 
clinical quality measures covering three NQS domains from the 28 
available electronic clinical quality measures. For the FY 2018 payment 
determination and subsequent years, we are proposing that hospitals 
must submit Q3 and Q4 data for 16 measures chosen by a hospital and 
reported as electronic clinical quality measures. For example, for the 
FY 2018 payment determination, hospitals would be required to submit Q3 
and Q4 CY 2016 data for 16 measures of their choice. This proposal is 
in alignment with the Medicare EHR Incentive

[[Page 24582]]

Program, as discussed in section VIII.D.2.b. of the preamble of this 
proposed rule.
    Hospitals would not fail validation based on these data for CY 
2016/FY 2018 payment determination reporting because validation for 
electronic measures is currently under development. In the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50269 through 50273), we finalized a 
proposal to conduct a validation pilot test for electronically 
specified measures in FY 2015. The pilot is currently underway and 
therefore, the results are not yet available.
    We will delay publicly reporting electronic clinical quality 
measure data submitted by hospitals for CY 2016/FY 2018 payment 
determination in order to allow time for us to evaluate the 
effectiveness of electronically reported clinical quality measure data. 
In the meantime, measures reported via electronic clinical quality 
measure will be marked with a footnote on Hospital Compare noting that: 
(1) The hospital submitted data via EHR; (2) data are being processed 
and analyzed; and (3) CMS will eventually publicly report this data 
once CMS determines the data to be reliable and accurate.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50815 through 
50818), we adopted a policy under which we would only publicly report 
electronic clinical quality measure data under the Hospital IQR Program 
if we determined that the data are accurate enough to be reported. We 
believe that our current proposal to delay public reporting of 
electronic clinical quality measure data submitted by hospitals for CY 
2016/FY 2018 payment determination is also in line with our existing 
policies. In future rulemaking, we will continue to address our intent 
to ensure that measures meet the reliability and validity requirements 
set for public reporting and that the measures are accurate and 
understandable before measures are publicly reported on Hospital 
Compare.
    As shown in the table above entitled ``Hospital IQR Program 
Measures for the FY 2018 Payment Determination and Subsequent Years,'' 
6 measures (ED-1, ED-2, STK-04, VTE-5, VTE-6, and PC-01) may be 
reported either via chart-abstraction or as electronic clinical quality 
measures. For the FY 2018 payment determination and subsequent years, 
hospitals may either report a full year of data (Q1 through Q4) in 
accordance with the submission requirements for chart-abstracted data, 
or electronically submit two quarters of data (Q3 and Q4) for each of 
these 6 measures. If hospitals choose to report these 6 measures 
electronically, the measures can be used to count toward the Hospital 
IQR Program's 16 required electronic clinical quality measures. 
Hospitals choosing to report these 6 measures via chart-abstraction 
must select other electronic measures to meet the requirement to report 
16 electronic clinical quality measures. Additional detail on 
submitting electronic data for measures can be found in section 
VIII.A.10.d.(3) of the preamble of this proposed rule.
    We recognize that measure rates may not be comparable between 
measures reported via chart-abstraction and measures that are 
electronically specified. Collecting electronic measure data according 
to our proposal that hospitals must select and submit 16 electronic 
clinical quality measures will help us evaluate variations in data 
capture modes (chart-abstracted versus electronic clinical quality 
measures) in order to determine whether and what adjustments are 
necessary for the two different modes of collection. We refer readers 
to section VIII.A.3.b. of the preamble of this proposed rule, where we 
discuss CMS' belief that, although the intent of a measure is the same 
whether it is reported via chart-abstraction or electronically, the 
submission modes and measure rates are not the same.
    We also considered two alternative required electronic clinical 
quality measure reporting options. Alternative A would require 
hospitals to submit 10 of 28 quality measures: (1) VTE-1; (2) STK-02; 
(3) ED-1; (4) STK-05; (5) STK-06; (6) STK-10; (7) VTE-2; (8) STK-08; 
(9) ED-2; and (10) STK-03. Our data show that these measures are most 
frequently reported with non-zero values among hospitals attesting 
under 2014 Meaningful Use. In addition, all 10 of these measures have 
been included in the Hospital IQR Program measure set as voluntary 
electronic clinical quality measures since CY 2014/FY 2016 payment 
determination (79 FR 50209 through 50211). Alternative B would require 
hospitals to submit 10 of 28 quality measures of each hospital's 
choice. Both alternatives differ from our proposal only in the number 
and/or composition of the electronic clinical quality measures to be 
reported; that is, for both of these alternatives, the reporting 
periods and submission requirements would be the same as those proposed 
in this proposed rule.
    However, we determined not to pursue these alternative reporting 
options as we believe that requiring hospitals to report more measures 
electronically is in line with our goals to move towards electronic 
clinical quality measure reporting and to align with the EHR Incentive 
Program, which requires reporting on 16 clinical quality measures 
covering at least 3 domains.
    We believe that our proposals will ultimately decrease reporting 
burden to hospitals. Once capture is possible within EHR, the time and 
resources needed to submit quality measures data are significantly less 
compared to manual abstraction. Electronic clinical quality measure 
collection does not require hospital staff time to find and pull paper 
medical records and manually review them to abstract data elements used 
in measure calculation. We acknowledge that there are initial costs, 
but believe that long-term benefits associated with electronic data 
capture outweigh those costs.
    We welcome public comment on our proposal to require hospitals to 
select and submit 16 electronic clinical quality measures covering 
three NQS domains from the 28 available electronic clinical quality 
measures for eligible hospitals and CAHs for the FY 2018 payment 
determination and subsequent years. We refer readers to section 
VIII.A.10.d.(3) of the preamble of this proposed rule for detail on 
reporting periods and submission deadlines for electronic clinical 
quality measures.
9. Future Considerations for Electronically Specified Measures: 
Consideration To Implement a New Type of Measure That Utilizes Core 
Clinical Data Elements
a. Background
    We have implemented several claims-based measures comparing 
hospital performance on 30-day mortality, 30-day readmission, and 
complications following hospitalization for several conditions and 
procedures in the Hospital IQR, Hospital Readmissions Reductions, and 
Hospital VBP Programs. Although these measures have been shown to 
provide valid information about hospital performance, the clinical 
community continues to express the opinion that data gathered directly 
from patients and used by clinicians to guide diagnostic decisions and 
treatment are preferable for risk adjustment of hospital outcome 
measures. In response to clinicians and providers' feedback in public 
comment periods during measure development, and keeping with our goal 
to move toward the use of electronic health records (EHRs) for 
electronic quality measure reporting throughout CMS programs, where 
feasible, we are considering: (1) The use of core clinical data 
elements derived from EHRs for use in future quality measures (for 
example, risk adjustment of outcome

[[Page 24583]]

measures); (2) the collection of additional administrative linkage 
variables to link a patient's episode of care from EHR data with his 
administrative claim data, and (3) use of content exchange standards.
    During a July 2014 public comment period on the CMS Call for Public 
Comment Web site \146\ for the hybrid hospital-wide readmission measure 
with administrative claims and electronic health record data, we 
received supportive feedback on the importance of the use of clinical 
data in hospital outcome measures. Commenters supported our efforts in 
examining new approaches to provide a more accurate assessment and 
portrayal of services provided by clinicians and hospitals, and the 
feedback also indicated their belief that it is very important that 
enriched clinical data from an EHR be used to supplement the clinically 
limited datasets available from administrative claims data. We note 
that reviewers can find the public comment summary report within the 
Hybrid Hospital-Wide Readmission Measure with Electronic Health Record 
Extracted Risk Factors (Version 1.1), in the ``Downloads'' section of 
our Measure Methodology Web page. We refer readers to the Core Clinical 
Data Elements and Hybrid Measures zip file found on our Web site at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    \146\ CMS.gov. Measure Management System, Public Comment. Hybrid 
Hospital-Wide Readmission Measure with Claims and Electronic Health 
Record Data. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/CallforPublicComment.html.
---------------------------------------------------------------------------

    In response to this public feedback, as well as CMS policy goals, 
we have identified a set of 21 clinical variables, or core clinical 
data elements, which we note are routinely collected on hospitalized 
adults and feasibly extracted from hospital EHRs. We believe that these 
core clinical data elements can be adapted for future use as part of 
specific quality measures. During our testing, we found that these 21 
core clinical data elements can be used to risk adjust 30-day mortality 
and 30-day readmission outcome measures. Although we have thus far only 
tested the core clinical data elements for use in the risk adjustment 
models of hospital-level outcome measures, they could be utilized in 
other ways in the future. We anticipate that EHRs will continue to 
improve capturing of relevant clinical data and we also anticipate 
future expansion of the list of core clinical data elements.
    In the future, one way in which we envision using core clinical 
data elements in conjunction with other sources of data, such as 
administrative claims, is to calculate ``hybrid'' outcome measures, 
which are quality measures that utilize more than one source of data. 
We believe that these types of hybrid measures could enhance the 
current CMS administrative claims-based outcome measures by utilizing 
patient clinical data captured in the EHR. We have shown that core 
clinical data elements captured in EHRs and used to risk adjust 
hospital outcome measures improve the discrimination of the measures, 
or the ability to distinguish good and poor performers, as assessed by 
the c-statistic, which evaluates the measure's ability to discriminate 
or differentiate among high and low performing 
hospitals.147 148 149 Finally, hybrid measure results would 
need to be calculated by CMS to determine hospitals' risk-adjusted 
rates relative to national rates used in public reporting. With hybrid 
measures, hospitals would forward data extracted from the EHR, and CMS 
would perform the measure calculations.
---------------------------------------------------------------------------

    \147\ Hybrid 30-Day Risk-standardized Acute Myocardial 
Infarction Mortality Measure with Electronic Health Record Extracted 
Risk Factors (Version 1.1).
    \148\ Hybrid Hospital-Wide Readmission Measure with Electronic 
Health Record Extracted Risk Factors (Version 1.1).
    \149\ 2013 Core Clinical Data Elements Technical Report (Version 
1.1).
---------------------------------------------------------------------------

    To illustrate one way in which the 21 core clinical data elements 
can be used, we developed two hybrid measures: (1) Hospital 30-Day 
Risk-Standardized Acute Myocardial Infarction (AMI) Mortality eMeasure 
(NQF #2473); and (2) a hybrid hospital-wide 30-day readmission measure, 
which has not yet undergone NQF endorsement proceedings. However, the 
latter measure's development was encouraged by the MAP.\150\ We note 
that the 2013 Core Clinical Data Elements Technical Report Version 1.1 
(a methodology report) provides a more detailed review of the clinical 
core data elements. This document is posted on our Measure Methodology 
Web page, under the ``Downloads'' section in Core Clinical Data 
Elements and Hybrid Measures zip file, available on our Web site at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    \150\ National Quality Forum. Measure Application Partnership. 
Available at: https://share.cms.gov/center/CCSQ/QMHAG/DHMM/Measures%20Development%20and%20Maintenance/map/MAP%202014/MAP%202015/map_pre-rulemaking_final_report_2015.pdf. Accessed on 
February 5, 2015.
---------------------------------------------------------------------------

b. Overview of Core Clinical Data Elements
    Core clinical data elements are a set of clinical variables derived 
from EHRs that can be used to risk adjust hospital outcome measures. We 
have currently identified a set of 21 core clinical data elements that: 
(1) Can be feasibly extracted from current EHR systems; (2) are 
available on most adult patients; and (3) are relevant to patient 
outcomes following hospitalization. These core clinical data elements 
are listed in the table below.

  Currently Identified Core Clinical Data Elements Considered for Risk-
   Adjustment of Hybrid Outcome Measures Used in the Hospital setting
------------------------------------------------------------------------
                                                        Time window for
         Data elements           Units of measurement    first captured
                                                         values (hours)
------------------------------------------------------------------------
                         Patient Characteristics
------------------------------------------------------------------------
Age at admission..............  Years................                 --
Gender........................  Male or female.......                 --
------------------------------------------------------------------------
                       First-Captured Vital Signs
------------------------------------------------------------------------
Heart Rate....................  Beats per minute.....                0-2
Systolic Blood Pressure.......  mmHg.................                0-2

[[Page 24584]]

 
Diastolic Blood Pressure......  mmHg.................                0-2
Respiratory Rate..............  Breath per minute....                0-2
Temperature...................  Degrees Fahrenheit...                0-2
Oxygen Saturation.............  Percent..............                0-2
Weight........................  Pounds...............               0-24
------------------------------------------------------------------------
                    First-Captured Laboratory Results
------------------------------------------------------------------------
Hemoglobin....................  g/dL.................               0-24
Hematocrit....................  % red blood cells....               0-24
Platelet......................  Count................               0-24
WBC Count.....................  Cells/mL.............               0-24
Potassium.....................  mEq/L................               0-24
Sodium........................  mEq/L................               0-24
Chloride......................  mEq/L................               0-24
Bicarbonate...................  mmol/L...............               0-24
BUN...........................  mg/dL................               0-24
Creatinine....................  mg/dL................               0-24
Glucose.......................  mg/dL................               0-24
Troponin......................  ng/mL................               0-24
------------------------------------------------------------------------

    This set of core clinical data elements consists of the first 
captured vital signs, and the results of a complete blood count and 
basic chemistry panel. These core clinical data elements were selected 
because they were empirically shown to be captured during routine 
clinical practice on most adult hospitalized patients.\151\ Among other 
ways, one way in which we envision using these core clinical data 
elements is to risk adjust outcomes measures, since the elements 
improve the discrimination of hospital outcome measures as assessed by 
c-statistic and enhances the face validity of measures for the clinical 
community, which continue to express a preference for these types of 
data to account for patients' severity of illness.\152\
---------------------------------------------------------------------------

    \151\ 2013 Core Clinical Data Elements Technical Report (Version 
1.1). Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    \152\ Hybrid 30-day Risk-standardized Acute Myocardial 
Infarction Mortality Measure with Electronic Health Record Extracted 
Risk Factors (Version 1.1) and Hybrid Hospital-Wide Readmission 
Measure with Electronic Health Record Extracted Risk Factors 
(Version 1.1). Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    In the context of risk-adjustment, future hybrid measures would 
utilize some or all of the 21 core clinical data elements listed above, 
as well as any future feasible core clinical data elements. For 
example, the Hospital 30-day Risk-Standardized Acute Myocardial 
Infarction (AMI) Mortality eMeasure (NQF #2473) uses five core clinical 
data elements: Age; heart rate; systolic blood pressure; troponin; and 
creatinine.\153\ In contrast, the hybrid hospital-wide measure uses 14 
of the 21 core clinical data elements (age, heart rate, respiratory 
rate, temperature, systolic blood pressure, oxygen saturation, weight, 
hematocrit, white blood cell count, sodium, potassium, bicarbonate, 
creatinine and glucose).\154\ These two hybrid measures illustrate how 
specific core clinical data elements used in a given hybrid measure 
will vary depending on the core clinical data elements identified as 
relevant for and predictive of that measure outcome in the target 
cohort.
---------------------------------------------------------------------------

    \153\ Hybrid 30-day Risk-standardized Acute Myocardial 
Infarction Mortality Measure with Electronic Health Record Extracted 
Risk Factors (Version 1.1). Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    \154\ Hybrid Hospital-Wide Readmission Measure with Electronic 
Health Record Extracted Risk Factors (Version 1.1). Available at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    We note that the 21 core clinical data elements included are 
already routinely recorded in the EHR by clinical staff at the 
beginning of an inpatient encounter to diagnose and treat patients. 
Collection of these core clinical data elements are in response to 
stakeholder preference, and in particular, for the use of clinical 
information in risk models, but is not meant to guide or alter the care 
patients receive. We believe clinical staff should continue to only 
perform measurements or tests that are appropriate for diagnostic 
assessment or treatment of patients.
    We assessed the feasibility of extraction of the 21 core clinical 
data elements in models of readmission and mortality outcome measures 
(Core Clinical Data Elements Development is discussed below). For 
additional detail on testing and the measure methodologies, we refer 
readers to the 2013 Core Clinical Data Elements Technical Report 
Version 1.1 methodology report posted on our Measure Methodology Web 
page, under the ``Downloads'' section in Core Clinical Data Elements 
and Hybrid Measures zip file, on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
c. Core Clinical Data Elements Development
    To identify this set of core clinical data elements, we first 
focused on those data elements that can be used to risk adjust hospital 
outcome measures. We developed a systematic five-step approach in which 
we: (1) Established a set of criteria to assess the feasibility of 
consistently identifying and extracting EHR data elements, and convened 
a diverse group of health information technology experts and end users 
to apply these criteria to EHR data; (2) conducted a systematic review 
of the literature to identify clinical data that has been shown to 
predict patient outcomes following acute care hospital admissions; (3) 
assessed the frequency and timing of capture of candidate data

[[Page 24585]]

elements using a dataset from an active EHR data warehouse of a large 
healthcare system serving over 3.3 million beneficiaries; \155\ (4) 
tested the utility of feasible data elements in risk-adjusted 
hierarchical models of 30-day mortality following hospitalization for a 
variety of common and costly medical conditions (for example, heart 
failure, pneumonia, and stroke); and (5) tested the core clinical data 
elements as risk-adjustment variables in the previously adopted 
Hospital IQR Program measure, CMS 30-Day Hospital-Wide All-Cause 
Unplanned Readmission Outcome measure (NQF #1789) finalized in the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53521 through 53528), creating the 
hybrid hospital-wide readmission measure. These steps are discussed in 
more detail below.
---------------------------------------------------------------------------

    \155\ 2013 Core Clinical Data Elements Technical Report Version 
1.1. Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    To identify and test the core clinical data elements, a TEP was 
convened. TEP members applied feasibility criteria to each data type in 
the Quality Data Model (QDM) considering the context of adult 
hospitalized patients only. The QDM is an information model that 
provides a standardized description of the clinical information 
captured in EHRs, and provides a uniform framework to support quality 
measurement that utilizes EHR data. TEP members were asked to indicate 
whether at least one data element within each data type was: (1) 
Consistently obtained in the target population (patients 18 years and 
older) based on current clinical practice; (2) captured with a standard 
definition and recorded in a standard format within the EHR; and (3) 
entered in structured fields that are feasibly retrieved from current 
EHR systems.
    Next, we conducted a systematic review of the literature to 
identify clinical data shown to be predictive of mortality and 
readmission in statistical models. A thorough review of studies 
revealed that several categories of clinical information from patient 
medical records captured during diagnostic assessment and treatment 
were commonly used to predict mortality and readmission. These 
included, but were not limited to, basic demographic information, 
laboratory test results, and vital sign findings. The results are 
described in the 2013 Core Clinical Data Elements Technical Report 
(Version 1.1) and is available on our Measure Methodology Web page, 
under the ``Downloads'' section in Core Clinical Data Elements and 
Hybrid Measures zip file found on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    In order to empirically establish the feasibility of potential 
clinical data elements identified by the TEP, we used a large multi-
site database from a healthcare system serving over 3.3 million 
beneficiaries. We examined the format of the clinical data elements, 
the consistency and timing of capture, and the distribution of these 
extracted clinical data values across conditions, hospitals, and point 
of hospital entry. From the results of that analysis, we identified a 
list of clinical data elements that were consistently captured for more 
than 90 percent of adults admitted for common medical conditions. In 
addition, only the first clinical data elements captured close to the 
time a patient arrived at the facility were considered in order to 
reflect patients' clinical status when they presented, and not the 
results of treatment received at the facility. Analyses showed that 
vital signs (heart rate, systolic blood pressure, diastolic blood 
pressure, respiratory rate, temperature, and oxygen saturation) were 
captured within 2 hours of arrival to the hospital for most patients 
who were subsequently admitted to the same facility. In addition, 
analyses showed that weight and laboratory tests (hemoglobin, 
hematocrit, platelet, white blood cell (WBC) count, potassium, sodium, 
chloride, bicarbonate, blood urea nitrogen (BUN), creatinine, glucose, 
and troponin) were captured within 24 hours of arrival to the hospital 
for most patients who were subsequently admitted to the same facility. 
This was true whether patients were first assessed in the emergency 
department, or an inpatient unit. From these analyses, we specified the 
units of measurement and time window for first captured values for each 
of the 21 feasible and relevant core clinical data elements.
d. Core Clinical Data Elements Feasibility Testing Using Readmission 
and Mortality Models
    In order to demonstrate that the core clinical data elements 
improved hospital outcome measures, we tested them in models of 30-day 
mortality and 30-day readmission following hospitalization from a 
variety of conditions. The 21 core clinical data elements shown in the 
table above were statistically significant predictors in at least one 
measure of 30-day mortality after admission for eight common medical 
conditions: AMI; congestive heart failure; pneumonia; acute 
cerebrovascular disease; septicemia (except during labor); diabetes 
mellitus with complications; coronary atherosclerosis; and cardiac 
dysrhythmias.\156\ All of the core clinical data elements listed above 
were also statistically significant predictors of readmission in the 
risk-adjusted models of 30-day readmission in a hospital-wide 
cohort.\157\ The testing results demonstrate that the core clinical 
data elements enhanced the discrimination (assessed using the c-
statistic) when used either in combination with or in place of 
administrative claims data for risk adjustment of currently reported 
CMS 30-day mortality and readmission outcome measures. For more 
detailed information on testing, we refer readers to the methodology 
reports posted on our Measure Methodology Web page, under the 
``Downloads'' section in Core Clinical Data Elements and Hybrid 
Measures zip file, found on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

    \156\ Hybrid 30-Day Risk-standardized Acute Myocardial 
Infarction Mortality Measure with Electronic Health Record Extracted 
Risk Factors (Version 1.1). Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
    \157\ Hybrid Hospital-Wide Readmission Measure with Electronic 
Health Record Extracted Risk Factors (Version 1.1). Available at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html.
---------------------------------------------------------------------------

e. Use of Core Clinical Data Elements in Hospital Quality Measures for 
the Hospital IQR Program
    In the future, we are considering requiring hospitals to 
electronically submit core clinical data elements in several contexts. 
One use considered would be to risk-adjust claims-based hybrid quality 
measures similar to what is described in our discussion above. In 
addition, we are also considering using core clinical data elements for 
quality measures that apply more generally to an all-payer population 
(that is, a population greater than or equal to 18 years of age). As we 
learn more about this method of data collection, we will be able to 
give more information. As it stands, we envision that use of core 
clinical data elements for an all payer population would not be limited 
to merely risk-adjustment or in claims-based hybrid measures. However, 
should we require reporting of core clinical data elements, it would be 
in the context of specific measures proposed through rulemaking for the 
Hospital IQR Program and potentially

[[Page 24586]]

other CMS quality programs. Specific electronically submitted core 
clinical data elements required would depend on the individual measure 
adopted.
    For claims-based hybrid measures, linking variables would be 
required to ensure that the datasets containing administrative claims 
data are correctly linked with EHR datasets containing the core 
clinical data elements for proper risk adjustment. The linkage 
variables would come from an additional requirement for hospitals to 
submit these variables. Such linkage variables, for example, might 
include admission and discharge dates, CMS certification number, and 
date of birth. Some of these linkage variables are already routinely 
collected by EHRs; however, actual linkage variables required for a 
specific hybrid measure would depend on empirical testing of approaches 
to linkage for individual measure cohorts.
f. Content Exchange Standard Considerations for Core Clinical Data 
Elements
    Data can be collected in EHRs and health information technology 
(IT) systems using standardized formats to promote consistent 
representation and interpretation, as well as to allow for systems to 
compute data without needing human interpretation. These standards are 
referred to as content exchange standards, because the standard details 
how data should be represented and the relationships between data 
elements. This allows the data to be exchanged across EHRs and health 
IT systems while retaining their meaning. Commonly used content 
exchange standards include the Consolidated Clinical Data Architecture 
(C-CDA) and the Quality Reporting Data Architecture (QRDA). The C-CDA 
standard is frequently used for the representation of summary care 
records and provides a format for electronically representing data 
within document templates and sections.\158\ The QRDA standard provides 
a document format and standard structure to electronically report 
quality measure data.\159\ QRDA allows for the use of CDA templates 
(the same underlying standard used in C-CDA) to represent quality 
measures using the QDM information model described above. Thus, QRDA 
could be considered a related standard to C-CDA for the specific 
quality reporting use case.
---------------------------------------------------------------------------

    \158\ Health Level 7 International. Product Brief. Available at: 
http://www.hl7.org/implement/standards/product_brief.cfm?product_id=379.
    \159\ Health Level 7 International. Product Brief. Available at: 
http://www.hl7.org/implement/standards/product_brief.cfm?product_id=35.
---------------------------------------------------------------------------

    The core clinical data elements we are considering could be 
electronically reported to CMS formatted according to either the C-CDA 
or QRDA standard to promote consistent representation and more 
efficient calculation of hybrid measure results. These standards are 
also currently required for participation in the Medicare and Medicaid 
EHR Incentive Programs. Sections 1886(n) and 1814(l) of the Act, as 
added by the HITECH Act, authorize incentive payments under Medicare 
for eligible hospitals and critical access hospitals that successfully 
demonstrate the meaningful use of Certified EHR Technology (CEHRT). 
Section 1903(t)(6)(C) of the Act also requires that Medicaid providers 
adopt, implement, upgrade, or meaningfully use CEHRT if they are to 
receive incentives. We refer readers to the CEHRT definition adopted by 
the Office of the National Coordinator for Health IT (ONC) in its 2014 
Edition standards and certification criteria final rule (77 FR 53972). 
ONC's CEHRT definition is adopted in Sec.  170.102 and includes the 
capabilities defined for the Base EHR, including certification to 
create transitions of care documents using the C-CDA standard and to 
successfully report clinical quality measures using the QRDA standard 
(we refer readers to Table 6 of the ONC 2014 Edition standards and 
certification criteria final rule at 77 FR 54265).
    We are specifically considering the use of QRDA Category I (QRDA-I) 
as the transmission standard for core clinical data elements to CMS, 
because the core clinical data elements specified for risk adjustment 
need to be captured in relation to the start of an inpatient encounter, 
to be certain the data has been appropriately connected to the 
encounter. The QRDA-I standard enables an individual patient-level 
quality report that contains quality data for one patient for one or 
more quality measures. For further detail on QRDA-I, the most recently 
available QRDA-I specifications can be found at: http://www.hl7.org/implement/standards/product_brief.cfm?product_id=35.
    Regardless of whether C-CDA or QRDA-I was used for the reporting of 
core clinical data elements, we note that these data exchange standards 
would enhance alignment across CMS programs, as well as reduce EHR 
developer and provider burden by adopting standards that are already in 
place for the exchange of electronically specified clinical and quality 
data.
    As part of this comment solicitation, we are inviting comment on 
whether EHR technology should be required to be certified under the ONC 
Health IT Certification Program \160\ for the submission of the core 
clinical data elements for participation in the Hospital IQR Program 
using the most appropriate content exchange standard (such as, and not 
limited to, QRDA-1 or C-CDA). We believe that certification could test 
and certify that EHR technology can properly collect the core clinical 
data elements formatted to the appropriate content exchange standard 
(such as, and not limited to QRDA-1 or C-CDA), promoting more 
standardized and consistently represented data that can be submitted to 
CMS to risk-adjust hybrid measures.
---------------------------------------------------------------------------

    \160\ Health IT.gov. Certification Programs and Policy. 
Available at: http://healthit.gov/policy-researchers-implementers/about-onc-hit-certification-program.
---------------------------------------------------------------------------

    In summary, we are seeking public comment on the concept of 
collecting core clinical data elements, and in particular, we are 
interested in feedback specifically regarding: (1) The use of the core 
clinical data elements derived from EHRs for use in risk adjustment of 
outcome measures as well as other types of measures; (2) the collection 
of additional administrative linkage variables to link a patient's 
episode of care from EHR data with his/her administrative claim data; 
and (3) the use of content exchange standards for reporting these data 
elements. Regarding the use of content exchange standards, we welcome 
input on the benefits and implementation considerations if CMS were to 
require QRDA-I, as well as the tradeoffs to requiring QRDA-I instead of 
C-CDA or other content exchange standards.
10. Form, Manner, and Timing of Quality Data Submission
    a. Background
    Sections 1886(b)(3)(B)(viii)(I) and (II) of the Act state that the 
applicable percentage increase for FY 2015 and each subsequent year 
shall be reduced by one-quarter of such applicable percentage increase 
(determined without regard to sections 1886(b)(3)(B)(ix), (xi), or 
(xii) of the Act) for any subsection (d) hospital that does not submit 
data required to be submitted on measures specified by the Secretary in 
a form and manner, and at a time, specified by the Secretary. 
Previously, the applicable percentage increase for FY 2007 and each 
subsequent fiscal year until FY 2015 was reduced by 2.0 percentage 
points for subsection (d) hospitals failing to submit data in 
accordance with the description above. We note that, in accordance with 
the statute, the FY 2015 payment determination begins the

[[Page 24587]]

first year that the Hospital IQR Program will reduce the applicable 
percentage increase by one-quarter of such applicable percentage 
increase.
    In order to participate in the Hospital IQR Program, hospitals must 
meet specific procedural, data collection, submission, and validation 
requirements. For each Hospital IQR Program year, we require that 
hospitals submit data on each measure in accordance with the measure's 
specifications for a particular period of time. The data submission 
requirements, Specifications Manual, and submission deadlines are 
posted on the QualityNet Web site at: http://www.QualityNet.org/. 
Hospitals must register and submit quality data through the secure 
portion of the QualityNet Web site. There are safeguards in place in 
accordance with the HIPAA Security Rule to protect patient information 
submitted through this Web site.
b. Procedural Requirements for the FY 2018 Payment Determination and 
Subsequent Years
    The Hospital IQR Program procedural requirements are codified in 
regulation at 42 CFR 412.140. We refer readers to the codified 
regulations for participation requirements, as further explained by the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50810 through 50811). We are 
not proposing any changes to the procedural requirements.
c. Data Submission Requirements for Chart-Abstracted Measures
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51640 through 51641), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53536 
through 53537), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50811) 
for details on the Hospital IQR Program data submission requirements 
for chart-abstracted measures.
d. Alignment of the Medicare EHR Incentive Program Reporting for 
Eligible Hospitals and CAHs With the Hospital IQR Program
(1) Background
    We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50256 through 50259) for our policies to align electronic clinical 
quality measures data reporting and submission periods on a calendar 
year basis for the FY 2017 payment determination for both the Medicare 
EHR Incentive Program for eligible hospitals and CAHs, and the Hospital 
IQR Program. In this proposed rule, we are proposing to: (1) Continue 
to require Certified Electronic Health Record Technology (CEHRT) 2014 
Edition and (2) update reporting periods and submission deadlines, for 
the FY 2018 payment determination for the Hospital IQR Program.
(2) Proposed Electronic Clinical Quality Measure Certification for the 
FY 2018 Payment Determination
    As described in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50251), 
for the Hospital IQR Program, hospitals that submit electronic clinical 
quality measures data for the FY 2017 payment determination are 
required to submit data using CEHRT 2014 Edition, which is an 
Electronic Health Record certification. Although we required CEHRT, 
eligible hospitals were not required to ensure that their CEHRT 
products were recertified to the most recent version of the electronic 
specifications for the clinical quality measures. We also stated in the 
FY 2015 IPPS/LTCH PPS final rule (79 FR 50251), that for the FY 2017 
payment determination, a hospital could submit electronic clinical 
quality measures for the Hospital IQR Program during CY 2015 even if 
they attest their aggregate measure numerators and denominators through 
the Medicare EHR Incentive Program. The hospital could submit as test 
data or production data. Test data submissions are submissions that do 
not count as submissions; they are practice submissions. Production 
data submissions are considered final submissions meant to fulfill 
Hospital IQR Program submission requirements.
    We are proposing to continue the requirement for hospitals to use 
CEHRT 2014 Edition \161\ when submitting electronic clinical quality 
measures for the CY 2016/FY 2018 payment determination. We note that 
the Office of the National Coordinator for Health Information 
Technology (ONC) has proposed a new Edition of EHR technology which may 
be available for some providers as early as 2016 in its ``2015 Edition 
Health Information Technology (Health IT) Certification Criteria, 2015 
Edition Base Electronic Health Record (EHR) Definition, and ONC Health 
IT Certification Program Modifications'' (hereafter known as the ``2015 
Edition proposed rule'') (80 FR 16804 through 16921). However, we will 
require hospitals to continue to submit data for Hospital IQR Program 
purposes using the 2014 Edition for the FY 2018 payment determination. 
Any changes for the Hospital IQR Program because of ONC's update will 
be proposed in future rule making.
---------------------------------------------------------------------------

    \161\ Meaningful Use in 2014. Retrieved from: http://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/EducationalMaterials.html.
---------------------------------------------------------------------------

    We are inviting public comments on this proposal.
(3) Proposed Reporting Periods and Electronic Submission Deadlines for 
the FY 2018 Payment Determination
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50256 through 
50259), we finalized our policy that hospitals could voluntarily submit 
electronic clinical quality measure data for one calendar year (CY) 
quarter's data for either CY Q1 (January 1-March 31, 2015), CY Q2 
(April 1-June 30, 2015), or CY Q3 (July 1-September 30) by November 30, 
2015.
    In this proposed rule, for the FY 2018 payment determination, we 
are proposing changes to both the reporting periods and the submission 
deadlines.
    For the FY 2018 payment determination, we are proposing that 
hospitals must submit both Q3 and Q4 of 2016 data for 16 measures 
reported as electronic clinical quality measures. We also are proposing 
that for the FY 2018 payment determination, hospitals must submit the 
electronic clinical quality measure data for these two quarters (Q3 and 
Q4 of 2016) within 2 months after the end of the applicable calendar 
year quarter. For CY 2016, these deadlines would be November 30, 2016 
for Q3 and February 28, 2017 for Q4. We refer readers to the table 
entitled ``Proposed CY 2016/FY 2018 Payment Determination Hospital IQR 
Program Electronic Reporting Periods and Submission Deadlines for 
Eligible Hospitals,'' below.
    As part of our measure maintenance process, each year we make 
updates to the electronic specifications of the Clinical Quality 
Measures approved for submission in CMS programs. These annual updates 
are found on our Web site at: http://www.cms.gov/Regulations-andGuidance/Legislation/EHRIncentivePrograms/eCQM_Library.html. In 
developing these reporting periods and submission timelines, we 
considered hospitals' and vendors' ability to report electronic 
clinical quality measures and the burden associated with implementing 
the 2015 annual update. The May 2015 annual update of electronic 
clinical quality measure specifications will include changes to the 
Quality Data Model (QDM) and the Health Quality Measure Format 
(HQMF),\162\ and we recognize that hospitals may require additional 
time to implement the associated software changes. Because of

[[Page 24588]]

this, we are proposing that hospitals must adopt the most recent annual 
update prior to data submission. For example, for the CY 2016/FY 2018 
payment determination, hospitals would need to submit electronic 
clinical quality measure using the 2015 Annual Update. As a result and 
as stated above, we are proposing to delay the required reporting of 
electronic clinical quality measures to begin with Q3 of 2016, with a 
reporting deadline of November 30, 2016. The table below shows the 
required electronic clinical quality measure reporting periods and 
submission deadlines for CY 2016.
---------------------------------------------------------------------------

    \162\ eCQI Resource Center: Advance Notice of Proposed Changes 
for the 2015 eCQM Annual Update; Pre-release 2015 Annual Update 
specifications available in HQMF R2.1 format. Available at: http://www.healthit.gov/ecqi-resource-center/.

   Proposed CY 2016/FY 2018 Payment Determination Hospital IQR Program
   Electronic Reporting Periods and Submission Deadlines for Eligible
                                Hospitals
------------------------------------------------------------------------
        Discharge reporting periods              Submission deadline
------------------------------------------------------------------------
January 1, 2016-March 31, 2016............  N/A.
April 1, 2016-June 30, 2016...............  N/A.
July 1, 2016-September 30, 2016...........  November 30, 2016.
October 1, 2016-December 31, 2016.........  February 28, 2017.
------------------------------------------------------------------------

    We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50319 through 50321) for a detailed discussion of the final policy in 
the Medicare EHR Incentive Program for eligible hospitals and CAHs as 
well as section VIII.D. of the preamble of this proposed rule where the 
EHR Incentive Program discusses its proposals to further align with the 
Hospital IQR Program.
    We are inviting public comments on our proposals to continue the 
CEHRT 2014 Edition requirement and update our electronic clinical 
quality measure data reporting and submission periods for the FY 2018 
payment determination.
e. Sampling and Case Thresholds for the FY 2018 Payment Determination 
and Subsequent Years
    We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 
50221), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641), the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53537), and the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50819) for details on our sampling and case 
thresholds for the FY 2016 payment determination and subsequent years. 
We are making one proposal regarding our population and sampling 
policy. However, we are not proposing any changes to case thresholds.
    Currently, hospitals must submit to CMS quarterly aggregate 
population and sample size counts for Medicare and nonMedicare 
discharges for all measures in the topic areas for which chart-
abstracted data must be submitted. Hospitals are required to submit 
their aggregate population and sample size count for each topic area. 
In accordance with the policy we first adopted in the FY 2011 IPPS/LTCH 
PPS final rule (75 FR 50221), hospitals that have not treated patients 
in a specific topic area must still submit quarterly population and 
sample size counts for all Hospital IQR Program chart-abstracted data 
topics. For example, if a hospital has not treated AMI patients, the 
hospital is still required to submit a zero for its quarterly aggregate 
population and sample count for that topic in order to meet the 
requirement.
    In this proposed rule, we are proposing to revise this policy so 
that, beginning with the FY 2018 payment determination and subsequent 
years, hospitals will be required to submit population and sample size 
data only for those measures that a hospital submits as chart-
abstracted measures under the Hospital IQR Program. This differs from 
the current policy in that there may be instances where a hospital 
chooses to electronically submit a measure that can be submitted either 
via chart-abstraction or as an electronic clinical quality measure and 
under the proposed policy, we would not require population and sample 
size data in this case. Under the proposed policy, if a hospital 
submits a measure as an electronic clinical quality measure, or if a 
measure becomes voluntary or suspended, the population and sample data 
would not be required.
    We are inviting public comments on this proposal.
f. HCAHPS Requirements for the FY 2018 Payment Determination and 
Subsequent Years
    We refer readers to the FY 2011 IPPS/LTCH PPS final rule (75 FR 
50220), the FY 2012 IPPS/LTCH PPS final rule (76 FR 51641 through 
51643), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53537 through 
53538), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50819 through 
50820) for details on HCAHPS requirements. We are not proposing any 
changes to HCAHPS requirements.
    Hospitals and HCAHPS survey vendors should check the official 
HCAHPS Web site at http://www.hcahpsonline.org for new information and 
program updates regarding the HCAHPS Survey, its administration, 
oversight and data adjustments.
g. Data Submission Requirements for Structural Measures for the FY 2018 
Payment Determination and Subsequent Years
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51643 through 51644) and the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53538 through 53539) for details on the data submission requirements 
for structural measures. We are not proposing any changes to data 
submission requirements for structural measures.
h. Data Submission and Reporting Requirements for Healthcare-Associated 
Infection (HAI) Measures Reported via NHSN
    For details on the data submission and reporting requirements for 
healthcare-associated infection (HAI) measures reported via the CDC's 
National Healthcare Safety Network (NHSN) Web site, we refer readers to 
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51629 through 51633; 51644 
through 51645), the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539), and 
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50821 through 50822). 
Clarifications to the HAI data reporting and submission requirements 
policy can also be found in the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50259 through 50262). The data submission deadlines are posted on the 
QualityNet Web site at: http://www.QualityNet.org/. In this proposed 
rule, we are not proposing any changes to data submission and reporting 
requirements for HAI measures reported via the NHSN.
11. Proposed Modifications to the Existing Processes for Validation of 
Hospital IQR Program Data
a. Background
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53539 through 
53553), we finalized the processes and procedures for validation of 
chart-abstracted measures in the Hospital IQR Program for the FY 2015 
payment determination and subsequent years; the FY 2013 IPPS/LTCH PPS 
final rule also contains a comprehensive summary of all procedures 
finalized in previous years and still in effect. Several modifications 
to these processes were finalized for the FY 2016 and FY 2017 payment 
determinations in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50822 
through 50835).
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50262 through 50273) 
for the FY 2017 payment determination and subsequent years, we 
finalized additional modifications to these processes. These changes 
fall into the

[[Page 24589]]

following categories: (a) Eligibility criteria for hospitals selected 
for validation; (b) number of charts to be submitted per hospital for 
validation; (c) combining scores for HAI and clinical process of care 
measures; (d) processes to submit patient medical records for chart-
abstracted measures; and (e) plans to validate electronic clinical 
quality measure data.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50269 through 
50273), we finalized a policy to conduct a validation pilot test for 
electronic clinical quality measures. We stated that we intended to 
complete pilot activities in CY 2015 (79 FR 50271) and that continues 
to be our intention. We are not proposing any changes to our validation 
pilot test.
    However, in this proposed rule, we are proposing modifications to 
existing processes for validation of chart-abstracted measures, 
specifically for the Influenza Immunization (NQF #1659) measure.
b. Proposed Modifications to the Existing Processes for Validation of 
Chart-Abstracted Hospital IQR Program Data
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50265 through 
50273), we finalized a validation process, which included a separate 
validation stratum for the Influenza Immunization (NQF #1659) measure 
(the immunization measure validation stratum) because that measure 
overlapped with the Hospital VBP Program. The finalized validation 
process for chart-abstracted measures included three separate 
validation strata: HAI, Immunization, and Other/Clinical Process of 
Care (79 FR 50265 through 50273). The Immunization stratum includes 
only one measure, Immunization for Influenza (NQF #1659). This 
Immunization measure was included in its own stratum because it is used 
in the Hospital VBP Program and we wanted to ensure that every hospital 
selected for validation would be validated in this topic area.
    As discussed in section IV.F.2.b.(1) of the preamble of this 
proposed rule, we are proposing to remove the IMM-2 Influenza 
Immunization measure from the Hospital VBP Program. Given this proposed 
removal of the Influenza Immunization measure from the Hospital VBP 
Program, it is no longer necessary to ensure validation of this topic 
area by including a separate stratum for the Influenza measure. As a 
result, in this proposed rule, for the Hospital IQR Program beginning 
with the FY 2018 payment determination and for subsequent years, we are 
proposing to remove the separate immunization validation stratum and 
include the Influenza Immunization measure in the clinical process of 
care measure validation stratum. Under this proposal, we would continue 
to apply our chart-abstracted measure validation processes only to 
those chart-abstracted measures that are required under the Hospital 
IQR Program in a chart-abstracted form (as opposed to those measures 
that a hospital reports as electronic clinical quality measures, for 
example). This proposal is consistent with our proposed policy to 
require population and sample size data only for those measures that 
are required under the Hospital IQR Program. We refer readers to 
section VIII.A.10.e. of the preamble of this proposed rule for more 
detail on that proposal.
    We note that although this proposal includes an adjustment to the 
composition of the clinical process of care validation stratum, we are 
not proposing any changes to the overall validation sample size. Under 
the existing validation process, a total of eight charts are drawn for 
validation--five of which are drawn from the clinical process of care 
measures stratum and three of which are drawn from the immunization 
measure stratum. Under this proposal, however, while the total number 
of charts drawn is the same (eight), all eight measures will be drawn 
from the clinical process of care measure stratum, which would then 
include the Influenza Immunization measure. Accordingly, one sample of 
charts will be drawn from the clinical process of care measures.
    The proposed removal of the immunization validation stratum and 
inclusion of the Influenza Immunization measure in the clinical process 
of care validation stratum would result in an expanded pool of clinical 
process of care topic areas sampled for validation to include STK, VTE, 
ED, Sepsis, and Immunization. As described in the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 50266), all chart-abstracted measure topic areas 
included in the Hospital IQR Program, with the exception of the 
Perinatal Care topic area, are automatically included in the validation 
process. We do not include this topic area because the Elective 
Delivery PC-01 (NQF #0469) measure is reported in aggregate form, which 
is not consistent with our patient-level validation process (79 FR 
50266).
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50268 through 
50269), we outlined the weighting of each of three validation topic 
areas: Healthcare-associated infection (66.7 percent); Immunization 
(22.2 percent); and Other/Clinical Process of Care (11.1 percent). The 
table below shows the proposed effect on topic area weighting of our 
proposal to remove the immunization measure validation stratum and to 
move the Influenza Immunization (NQF #1659) measure to the clinical 
process of care validation stratum.

  Proposed Topic Area Weighting for Validation for the FY 2018 Payment
                   Determination and Subsequent Years
------------------------------------------------------------------------
                                                                Weight
                         Topic area                           (percent)
------------------------------------------------------------------------
Healthcare-associated infection (HAI)......................         66.7
Other/Clinical Process of Care.............................         33.3
                                                            ------------
    Total..................................................        100.0
------------------------------------------------------------------------

    We are inviting public comments on our proposal to remove the 
immunization measure validation stratum, to move the Influenza 
Immunization (NQF #1659) measure to the clinical process of care 
validation stratum, and to reweight the topic areas for validation 
beginning with the FY 2018 payment determination and for subsequent 
years.
12. Data Accuracy and Completeness Acknowledgement Requirements for the 
FY 2018 Payment Determination and Subsequent Years
    We refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53554) for details on Data Accuracy and Completeness Acknowledgement 
(DACA) requirements. We are not proposing any changes to the DACA 
requirements.
13. Public Display Requirements for the FY 2018 Payment Determination 
and Subsequent Years
    We refer readers to the FY 2008 IPPS final rule (72 FR 47364), the 
FY 2011 IPPS/LTCH PPS final rule (75 FR 50230), the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51650), the FY 2013 IPPS/LTCH PPS final rule (77 
FR 53554), and the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836) for 
details on public display requirements. The Hospital IQR Program 
quality measures are typically reported on the Hospital Compare Web 
site at: http://www.medicare.gov/hospitalcompare, but on occasion are 
reported on other CMS Web sites such as http://www.cms.gov and/or 
https://data.medicare.gov.
    We note that for the Mortality, Readmission, Complication, Payment 
and AHRQ measures, we will continue to replace publically reported data 
with

[[Page 24590]]

a footnote for hospitals that do not have data for at least 25 cases 
combined during the reporting period. If there are fewer than 25 
eligible cases, the measures are assigned to a separate category 
described as ``The number of cases is too small (fewer than 25) to 
reliably tell how well the hospital is performing.'' The measures are 
included in the calculation but are not publicly reported on Hospital 
Compare. For chart-abstracted or Web-based measures, if either the 
numerator or the denominator is greater than 0 and less than 11, the 
data are not reported on Hospital Compare, but rather data is displayed 
as ``Not Available''. This guidance does not apply to calculated 
measures, only to those in which cases/patients could be identified. We 
also provide footnote explanations on the Hospital Compare Web site at: 
http://www.medicare.gov/hospitalcompare/Data/Footnotes.html.
    We refer readers to section VIII.A.8.b. of the preamble of this 
proposed rule, where we are proposing to delay publicly reporting 
electronic clinical quality measure data submitted by hospitals for CY 
2016/FY 2018 payment determination in order to allow time for us to 
evaluate the effectiveness of electronically reported clinical quality 
measure data. In the meantime, measures reported via electronic 
clinical quality measures will be marked with a footnote on Hospital 
Compare noting that: (1) The hospital submitted data via EHR; (2) data 
are being processed and analyzed; and (3) we will eventually publicly 
report this data once we determine the data to be reliable and 
accurate.
    We are inviting public comments on our proposal.
14. Reconsideration and Appeal Procedures for the FY 2018 Payment 
Determination and Subsequent Years
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51650 through 51651), the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50836), and at 42 CFR 412.140(e) for details on reconsideration and 
appeal procedures for the FY 2017 payment determination and subsequent 
years. We are not proposing any changes to the reconsideration and 
appeals procedures.
15. Hospital IQR Program Extraordinary Circumstances Extensions or 
Exemptions
    We refer readers to the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51651 through 51652), the FY 2014 IPPS/LTCH PPS final rule (78 FR 50836 
through 50837), and 42 CFR 412.140(c)(2) for details on the Hospital 
IQR Program extraordinary circumstances extensions or exemptions 
policy.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50277), we noted 
that we will refer to the process as the Extraordinary Circumstances 
Extensions or Exemptions process and, accordingly, finalized changes 
reflecting this updated language in the corresponding regulation text. 
We are not proposing any changes to the Hospital IQR Program's 
extraordinary circumstances extensions or exemptions policy.

B. PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program

1. Statutory Authority
    Section 3005 of the Affordable Care Act added new sections 
1866(a)(1)(W) and (k) to the Act. Section 1866(k) of the Act 
establishes a quality reporting program for hospitals described in 
section 1886(d)(1)(B)(v) of the Act (referred to as ``PPS-Exempt Cancer 
Hospitals'' or ``PCHs'') that specifically applies to PCHs that meet 
the requirements under 42 CFR 412.23(f). Section 1866(k)(1) of the Act 
states that, for FY 2014 and each subsequent fiscal year, a PCH must 
submit data to the Secretary in accordance with section 1866(k)(2) of 
the Act with respect to such a fiscal year. For additional background 
information, including previously finalized measures and other policies 
for the PCHQR Program, we refer readers to the following final rules: 
The FY 2015 IPPS/LTCH PPS final rule (79 FR 50277 through 50288); the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 50838 through 50846); and the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53556 through 53561).
2. Proposed Removal of Six Surgical Care Improvement Project (SCIP) 
Measures From the PCHQR Program Beginning With Fourth Quarter (Q4) 2015 
Discharges and for Subsequent Years
    We are proposing to remove six SCIP measures from the PCHQR Program 
beginning with fourth quarter (Q4) 2015 discharges and for subsequent 
years. Under this proposal, PCHs will meet reporting requirements for 
the FY 2016 and FY 2017 programs by submitting first quarter (Q1) 
through third quarter (Q3) 2015 data for these measures:

 Surgery Patients Who Received Appropriate Venous 
Thromboembolism Prophylaxis within 24 Hours Prior to Surgery to 24 
Hours After Surgery (NQF #0218)
 Urinary Catheter Removed on Post-Operative Day One (POD1) or 
Post-Operative Day Two (POD2) with Day of Surgery Being Day Zero (NQF 
#0453)
 Prophylactic Antibiotic Received Within One Hour Prior to 
Surgical Incision (NQF #0527)
 Prophylactic Antibiotic Selection for Surgical Patients (NQF 
#0528)
 Prophylactic Antibiotic Discontinued Within 24 Hours After 
Surgery End Time (NQF #0529)
 Surgery Patients on Beta-Blocker Therapy Prior to Admission 
who Received a Beta-Blocker During the Perioperative Period (NQF #0284)

    We first adopted the six SCIP measures in the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50840 through 50841) and refer readers to that rule 
for a detailed discussion of the measures. As described in the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50205), these measures have been 
determined to be topped-out in the Hospital IQR Program and were 
removed from that program. To meet FY 2016 and FY 2017 program 
requirements, we are proposing that PCHs would continue to submit these 
six measures for first quarter (Q1) 2015 through third quarter (Q3) 
2015 discharges in accordance with the submission timeline we finalized 
in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50285). We are proposing 
to remove these measures from the PCHQR Program because we have removed 
them from the Hospital IQR Program and, because they have been removed 
from that program, it is no longer operationally feasible to collect 
these measures under the PCHQR Program. By removing these measures, we 
also would alleviate the maintenance costs and administrative burden 
for PCHs associated with reporting them (79 FR 50205).
    We are inviting public comments on these proposals.
3. Proposed New Quality Measures Beginning With the FY 2018 Program
a. Considerations in the Selection of Quality Measures
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53556), the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50837 through 50838), and the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50278), we indicated that we have taken 
a number of principles into consideration when developing and selecting 
measures for the PCHQR Program, and that many of these principles are 
modeled on those we use for measure development and selection under the 
Hospital IQR Program. In this proposed rule, we are not proposing any 
changes to the principles we consider when

[[Page 24591]]

developing and selecting measures for the PCHQR Program.
b. Summary of Proposed New Measures
    For the FY 2018 PCHQR Program, we are proposing to adopt three new 
quality measures. These measures meet the requirement under section 
1866(k)(3)(A) of the Act that measures specified for the PCHQR Program 
be endorsed by the entity with a contract under section 1890(a) of the 
Act (currently the NQF).
    The proposed measures are as follows:

 Centers for Disease Control and Prevention (CDC) National 
Healthcare Safety Network (NHSN) Facility-Wide Inpatient Hospital-Onset 
Clostridium difficile Infection (CDI) Outcome Measure (NQF #1717) (CDC 
NHSN CDI Measure)
 CDC NHSN Facility-Wide Inpatient Hospital-Onset Methicillin-
Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF 
#1716) (CDC NHSN MRSA Measure)
 CDC NHSN Influenza Vaccination Coverage Among Healthcare 
Personnel (HCP) Measure (NQF #0431) (CDC NHSN HCP Measure)

    The proposed measures were included on a publicly available 
document entitled ``List of Measures Under Consideration (MUC) for 
December 1, 2014,'' \163\ which is a list of quality and efficiency 
measures being considered for use in various Medicare programs. The 
proposed measures were also submitted to the Measure Applications 
Partnership (MAP), a public-private partnership convened by the NQF for 
the purpose of providing input to the Secretary on the selection of 
certain quality and efficiency measures. For the PCHQR Program, the MAP 
supported the inclusion of all three measures. The MAP's 
recommendations can be found in the ``Spreadsheet of MAP 2015 Final 
Recommendations.'' \164\
---------------------------------------------------------------------------

    \163\ Measure Applications Partnership: List of Measures Under 
Consideration (MUC) for December 1, 2014. Available at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=78318.
    \164\ National Quality Forum ``Process and Approach for MAP Pre-
Rulemaking Deliberations 2015'' Available at: http://www.qualityforum.org/Publications/2015/01/Process_and_Approach_for_MAP_Pre-Rulemaking_Deliberations_2015.aspx; 
and ``Spreadsheet of MAP 2015 Final Recommendations'' Available at: 
http://www.qualityforum.org/map/.
---------------------------------------------------------------------------

    In addition, all three of the proposed measures are currently 
reported under the Hospital IQR Program as described in the FY 2012 
IPPS/LTCH PPS final rule (76 FR 51630 through 51631). We refer readers 
to CDC's Web site for detailed measure information for the three 
measures we are proposing.165 166 The sections below outline 
our rationale for proposing to adopt these measures.
---------------------------------------------------------------------------

    \165\ CDC. Surveillance for C. difficile, MRSA, and other Drug-
resistant Infections. Available at: http://www.cdc.gov/nhsn/acute-care-hospital/cdiff-mrsa/index.html.
    \166\ CDC. Surveillance for Healthcare Personnel Vaccination. 
Available at: http://www.cdc.gov/nhsn/acute-care-hospital/hcp-vaccination/index.html.
---------------------------------------------------------------------------

c. CDC NHSN Facility-Wide Inpatient Hospital-Onset Clostridium 
difficile Infection (CDI) Outcome Measure (NQF #1717)
    Healthcare-associated infections (HAIs), such as CDI and MRSA, are 
a significant cause of morbidity and mortality. At any given time, 
approximately one in every 25 inpatients has an infection related to 
hospital care.\167\ These infections cost the U.S. healthcare system 
billions of dollars each year and lead to the loss of tens of thousands 
of lives. In addition, HAIs can have devastating emotional, financial 
and medical consequences.\168\ As a result of these adverse outcomes, 
we are committed to increasing patient safety by partnering with 
hospitals (for example, the CMS Partnership for Patients) \169\ to make 
hospital care safer, more reliable, and less costly by preventing 
injury and increased morbidity in patients, as well as allowing them to 
heal without complications.\170\
---------------------------------------------------------------------------

    \167\ HHS National Action Plan to Prevent Health Care-Associated 
Infections: Road Map to Elimination. Available at: http://www.health.gov/hai/prevent_hai.asp#hai.
    \168\ HHS National Action Plan to Prevent Health Care-Associated 
Infections: Road Map to Elimination. Available at: http://www.health.gov/hai/prevent_hai.asp#hai.
    \169\ CMS Innovation Center Partnership for Patients. Available 
at: http://innovation.cms.gov/initiatives/partnership-for-patients/.
    \170\ HHS National Action Plan to Prevent Health Care-Associated 
Infections: Road Map to Elimination. Available at: http://www.health.gov/hai/prevent_hai.asp#hai.
---------------------------------------------------------------------------

    CDC reports that prolonged antibiotic exposure, a long length of 
stay in a healthcare setting, and the existence of a serious underlying 
illness or immunocompromised condition (for example, cancer) increase 
the risk of CDI.\171\ As a result, we believe it is important to 
collect data on CDIs in the PCH setting, where cancer patients face 
increased exposure to these risk factors. Additionally, in recent 
years, CDIs have become more frequent, more severe, and more difficult 
to treat.\172\ Each year, CDI is linked to 14,000 American deaths.\173\ 
Infection is especially common in older adults, but also affects some 
otherwise healthy people who are not hospitalized and/or taking 
antibiotics.\174\
---------------------------------------------------------------------------

    \171\ CDC C. difficile FAQ. Available at: http://www.cdc.gov/HAI/organisms/cdiff/Cdiff_infect.html.
    \172\ FY 2012 IPPS/LTCH PPS final rule (76 FR 51630 through 
51631).
    \173\ CDC Vital Signs. Available at: http://www.cdc.gov/vitalsigns/pdf/2012-03-vitalsigns.pdf.
    \174\ FY 2012 IPPS/LTCH PPS final rule (76 FR 51630 through 
51631).
---------------------------------------------------------------------------

    This proposed measure addresses the National Quality Strategy (NQS) 
Patient Safety domain. The measure reports the standardized infection 
ratio (SIR) of hospital-onset CDI Laboratory-identified events (LabID 
events) among all patients in the facility. The numerator includes the 
total number of observed hospital-onset CDI LabID events among all 
inpatients in the facility, excluding well baby-nurseries and Neonatal 
Intensive Care Units.\175\ The denominator includes the total number of 
predicted hospital-onset CDI LabID events, calculated by multiplying 
the number of inpatient days for the facility by the hospital-onset CDI 
LabID event rate for similar types of facilities (obtained from a 
standard population).176 177
---------------------------------------------------------------------------

    \175\ NQF QPS. Available at: http://www.qualityforum.org/Qps/MeasureDetails.aspx?standardID=1717&print=0&entityTypeID=1.
    \176\ NQF QPS. Available at: http://www.qualityforum.org/Publications/2013/02/Patient_Safety_Measures_Complications_-_Phase_2.aspx.
    \177\ FY 2012 IPPS/LTCH PPS final rule (76 FR 51630 through 
51631).
---------------------------------------------------------------------------

    Beginning with a 2010-2011 baseline SIR of 1.0, we set a national 
goal to reduce the incidence of facility-onset CDI overall by 30 
percent (to a SIR of 0.70) by no later than 2013. However, we were not 
able to meet that goal, and the rate of facility-onset CDI decreased by 
only 2 percent as of 2012 (to a SIR of 0.98). Therefore, we believe it 
is critical to continue collecting data on CDI in the hospital setting, 
and to adopt this measure for the PCH setting, in order to ensure the 
highest quality of care for cancer patients and continue our effort to 
support HHS' National Action Plan to Prevent Healthcare Associated 
Infections (HAIs) and our proposed 2020 goal to reduce facility-onset 
of CDI by 30 percent from the 2015 baseline.\178\ The collection and 
evaluation of CDI data will allow PCH staff to evaluate whether their 
infection control efforts need improvement. We recognize the severe 
impact of CDI,\179\ and aim to continue efforts to increase patient 
protection and safety, and at the same time prevent adverse infections 
in the PCH setting.
---------------------------------------------------------------------------

    \178\ HHS National Action Plan to Prevent Health Care-Associated 
Infections: Road Map to Elimination: Proposed Targets. Available at: 
http://www.health.gov/hai/pdfs/HAI-Targets.pdf.
    \179\ Ibid.

---------------------------------------------------------------------------

[[Page 24592]]

    By proposing this measure in the PCHQR Program, we aim to continue 
to provide a common mechanism (that is, reporting to CDC's NHSN) that 
all hospitals, including PCHs, can use to uniformly submit and report 
measure data and inform their clinicians of the impact of targeted 
prevention efforts.
    We are inviting public comments on our proposal to add the CDC NHSN 
CDI Outcome Measure to the PCHQR Program beginning with the FY 2018 
program.
d. CDC NHSN Facility-Wide Inpatient Hospital-Onset Methicillin-
Resistant Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF 
#1716)
    Invasive MRSA infections may cause approximately 18,000 deaths per 
year during a hospital stay.\180\ Cancer patients are at increased risk 
for MRSA infections, specifically older adults with weakened immune 
systems who are receiving hospital inpatient care.\181\ As a result, we 
believe it is important to collect data on MRSA in the PCH setting.
---------------------------------------------------------------------------

    \180\ Catherine Liu, Arnold Bayer, et al.: Clinical Practice 
Guidelines by the Infectious Disease Society of America for the 
Treatment of Methicillin-Resistant Staphylococcus Aureus Infections 
in Adults and Children Infectious Disease Society of America 2011; 
52:e18.
    \181\ CDC. General Information about MRSA in Healthcare 
Settings: Available at: http://www.cdc.gov/mrsa/healthcare/index.html.
---------------------------------------------------------------------------

    This proposed measure addresses the NQS Patient Safety domain. This 
measure reports the SIR of hospital-onset unique blood source MRSA 
LabID events among all inpatients in a facility. The numerator includes 
the total number of observed hospital-onset unique blood source MRSA 
LabID events among all inpatients in the facility.\182\ The denominator 
includes the total number of predicted hospital-onset unique blood 
source MRSA LabID events, calculated by multiplying the number of 
inpatient days for the facility by the hospital-onset MRSA bacteremia 
LabID event rate for similar types of facilities (obtained from a 
standard population). 183 184
---------------------------------------------------------------------------

    \182\ NQF QPS. Available at: http://www.qualityforum.org/Qps/MeasureDetails.aspx?standardID=1716&print=0&entityTypeID=1.
    \183\ Ibid.
    \184\ FY 2012 IPPS/LTCH PPS final rule (76 FR 51630).
---------------------------------------------------------------------------

    Beginning with a 2009 baseline SIR of 1.0, we set a national goal 
to reduce the incidence of facility-onset MRSA infections by 50 percent 
by 2020. However, by 2012 the rate of facility-onset MRSA infections 
decreased by only 3 percent (to a SIR of 0.97). Therefore, we believe 
it is critical to continue collecting data on CDI in the hospital 
setting, and to adopt this measure for the PCH setting, to ensure the 
highest quality of care for cancer patients and continue our effort to 
support the HHS' National Action Plan and the proposed 2020 goal to 
reduce facility-onset MRSA infections by 50 percent from the 2015 
baseline.\185\
---------------------------------------------------------------------------

    \185\ HHS National Action Plan to Prevent Health Care-Associated 
Infections: Road Map to Elimination: Proposed Targets. Available at: 
http://www.health.gov/hai/pdfs/HAI-Targets.pdf.
---------------------------------------------------------------------------

    The collection and evaluation of MRSA data will allow PCH staff to 
evaluate whether their infection control efforts need improvement. By 
proposing this measure in the PCHQR Program, we aim to continue to 
provide a common mechanism (CDC NHSN) for all hospitals, including 
PCHs, to uniformly report measure data and inform their clinicians of 
the impact of targeted prevention efforts. Furthermore, we recognize 
the severe impact of MRSA and aim to continue our efforts to increase 
patient protection and safety, while at the same time preventing 
adverse infections in the PCH setting.
    We are inviting public comments on our proposal to add the CDC NHSN 
MRSA Measure to the PCHQR Program beginning with the FY 2018 program.
e. CDC NHSN Influenza Vaccination Coverage Among Healthcare Personnel 
[HCP] Measure (NQF #0431) (CDC NHSN HCP Measure)
    CDC estimates that in the United States, each year, on average 5 
percent to 20 percent of the population gets influenza and more than 
200,000 people are hospitalized from seasonal influenza-related 
complications.\186\ Influenza seasons are unpredictable and can be 
severe. Over a period of 30 years, between 1976 and 2006, estimates of 
influenza-associated deaths per year in the United States ranged from a 
low of approximately 3,000 to a high of approximately 49,000 
people.\187\ Because influenza can become widespread and have serious 
consequences, the Advisory Committee on Immunization Practices (ACIP) 
recommends that all health care personnel (HCP) and persons in training 
for health care professions be vaccinated annually against 
influenza.\188\ Persons who are infected with the influenza virus, 
including those with subclinical infection, can transmit the influenza 
virus to persons at higher risk for complications, such as 
immunocompromised cancer patients. Additionally, vaccination of HCP has 
been associated with reduced work absenteeism and fewer deaths among 
patients. Results of several studies also indicate that higher 
vaccination coverage among HCP is associated with lower incidence of 
nosocomial influenza.189 190 191 Such findings have led 
researchers to call for mandatory influenza vaccination of HCP.\192\
---------------------------------------------------------------------------

    \186\ CDC. Seasonal Influenza Q&A. Available at: http://www.cdc.gov/flu/about/qa/disease.html.
    \187\ CDC. Estimating Seasonal Influenza-Associated Deaths in 
the United States: CDC Study Confirms Variability of Flu. Available 
at: http://www.cdc.gov/flu/about/disease/us_flu-related_deaths.html.
    \188\ CDC. ``Prevention and control of seasonal influenza with 
vaccines: Recommendations of the Advisory Committee on Immunization 
Practices (ACIP), 2009.'' MMWR 58, no. Early Release (2009):1-52.
    \189\ Salgado CD, Giannetta ET, Hayden FG, Farr BM.: Preventing 
influenza by improving the vaccine acceptance rate of clinicians. 
Infection Control and Hospital Epidemiology 2004; 25: 923-928.
    \190\ Potter J, Stott DJ, Roberts MA, et al.: Influenza 
vaccination of health-care workers in long-term-care hospitals 
reduces the mortality of elderly patients. Journal of Infectious 
Diseases 1997; 175:1-6.
    \191\ Hayward AC, Harling R, Wetten S, et al.: Effectiveness of 
an influenza vaccine program for care home staff to prevent death, 
morbidity, and health service use among residents: cluster 
randomized controlled trial. British Medical Journal 2006; 333:1241-
1246.
    \192\ Talbot TR, Bradley SF, Cosgrove SE., et al.: SHEA position 
paper: Influenza vaccination of healthcare workers and vaccine 
allocation for healthcare workers during vaccine shortages. 
Infection Control and Hospital Epidemiology 2005; 26:882-890.
---------------------------------------------------------------------------

    This proposed measure addresses the NQS Patient Safety domain. The 
measure reports the percent of HCP who receive the influenza 
vaccination.\193\ The numerator includes HCP in the denominator 
population who during the time from October 1 (or when the vaccine 
became available) through March 31 of the following year, either: (a) 
Received an influenza vaccination administered at the facility, or 
reported in writing (paper or electronic) or provided documentation 
that the influenza vaccination was received elsewhere; (b) were 
determined to have a medical contraindication or history of Guillain-
Barr[eacute] Syndrome within 6 weeks after a previous influenza 
vaccination; (c) declined the influenza vaccination; or (d) had an 
unknown vaccination status.\194\ The denominator includes the number of 
HCP who are working in the health care facility for at least 1 working 
day between October 1 and March 31 of the following year, regardless of 
clinical responsibility or patient contact, and includes: (a) 
Employees; (b) licensed independent practitioners; and (c) adult 
students/trainees and volunteers.195 196

[[Page 24593]]

Numerators and denominators are collected separately for each of the 
specified groups.
---------------------------------------------------------------------------

    \193\ NQF QPS. Available at: http://www.qualityforum.org/Qps/0431.
    \194\ Ibid.
    \195\ Ibid.
    \196\ FY 2012 IPPS/LTCH PPS final rule (76 FR 51631).
---------------------------------------------------------------------------

    We believe it is important to collect data on this measure in order 
to ensure the highest quality of care for cancer patients in our effort 
to support one of the Healthy People 2020 goals of immunizing 90 
percent of healthcare personnel nationally by 2020.\197\ Overall, final 
2013-14 influenza vaccination coverage among HCP was 75.2 percent, 
similar to coverage of 72.0 percent in the 2012-13 season.\198\ We aim 
to increase patient protection and safety and at the same time prevent 
adverse outcomes (for example, transmitting influenza to patients, 
specifically high risk cancer patients, and premature death due to 
influenza) in the PCH setting.
---------------------------------------------------------------------------

    \197\ Healthy People 2020. Immunization and Infectious Diseases. 
Available at: http://www.healthypeople.gov/2020/topics-objectives/topic/immunization-and-infectious-diseases/objectives.
    \198\ CDC. Influenza Vaccination Information for Health Care 
Workers. Available at: http://www.cdc.gov/flu/healthcareworkers.html.
---------------------------------------------------------------------------

    We believe that this measure is applicable to the PCH setting based 
on CDC guidelines that patients who currently have cancer or who have 
had certain types of cancer in the past (such as lymphoma or leukemia), 
are at high risk for complications from influenza, including 
hospitalization and death.\199\ The involvement of HCP in influenza 
transmission has been a longstanding concern.200 201 
Vaccination is an effective preventive measure against influenza, and 
can prevent many illnesses, deaths, and losses in productivity.\202\
---------------------------------------------------------------------------

    \199\ CDC Preventing Infections in Cancer Patients. Available 
at: http://www.cdc.gov/cancer/flu/
    \200\ Maltezou HC, Drancourt M.: Nosocomial influenza in 
children. Journal of Hospital Infection 2003; 55:83-91.
    \201\ Salgado CD, Farr BM, Hall KK, Hayden FG.: Influenza in the 
acute hospital setting. The Lancet Infectious Diseases 2002; 2:145-
155.
    \202\ Wilde JA, McMillan JA, Serwint J, Butta J, O'Riordan MA, 
Steinhoff MC.: Effectiveness of influenza vaccine in health care 
professionals: a randomized trial. The Journal of the American 
Medical Association 1999; 281:908-913.
---------------------------------------------------------------------------

    By proposing this measure in the PCHQR Program, we aim to not only 
provide a common mechanism (CDC NHSN) for all hospitals, including 
PCHs, to uniformly report the measure data, but also to inform their 
clinicians of the impact of targeted prevention efforts. In addition, 
and most importantly, we believe that collecting this measure data in 
the PCH setting is necessary to support our effort to prevent 
unnecessary additional or prolonged hospitalizations (and associated 
costs), and to decrease premature death among cancer patients.
    We are inviting public comments on our proposal to add the CDC NHSN 
HCP Measure to the PCHQR Program beginning with the FY 2018 program.
    In summary, we are proposing three new measures for reporting 
beginning with the FY 2018 program. In conjunction with our proposal to 
remove the six SCIP measures from the PCHQR Program beginning with Q4 
2015 discharges, the PCHQR measure set would consist of 16 measures 
beginning with the FY 2018 program. Our proposed policies regarding the 
form, manner, and timing of data collection for these measures are 
discussed in section VIII.B.7. of the preamble to this proposed rule.
    The table below lists all previously adopted measures as well as 
the proposed new measures for the PCHQR Program beginning with the FY 
2018 program. It does not include the measures we are proposing to 
remove.

------------------------------------------------------------------------
                                Summary of finalized and proposed PCHQR
            Topic                Program measures beginning with the FY
                                              2018 program
------------------------------------------------------------------------
Safety and Healthcare-          CDC NHSN Central Line-Associated
 Associated Infection--HAI.     Bloodstream Infection (CLABSI) Outcome
                                Measure (NQF #0139).*
                                CDC NHSN Catheter-Associated
                                Urinary Tract Infections (CAUTI) Outcome
                                Measure (NQF #0138).*
                                Harmonized Procedure Specific
                                Surgical Site Infection (SSI) Outcome
                                Measure\*\ [currently includes SSIs
                                following Colon Surgery and Abdominal
                                Hysterectomy Surgery] (NQF #0753).*
                                CDC NHSN Facility-wide Inpatient
                                Hospital-onset Clostridium difficile
                                Infection (CDI) Outcome Measure (NQF
                                #1717).**
                                CDC NHSN Facility-wide Inpatient
                                Hospital-onset Methicillin-resistant
                                Staphylococcus aureus (MRSA) Bacteremia
                                Outcome Measure (NQF #1716).**
                                CDC NHSN Influenza Vaccination
                                Coverage Among Healthcare Personnel
                                [HCP] (NQF #0431).**
Clinical Process/Cancer-        Adjuvant Chemotherapy is
 Specific Treatments.           Considered or Administered Within 4
                                Months (120 days) of Diagnosis to
                                Patients Under the Age of 80 with AJCC
                                III (lymph node positive) Colon Cancer
                                (NQF #0223).*
                                Combination Chemotherapy is
                                Considered or Administered Within 4
                                Months (120 days) of Diagnosis for Women
                                Under 70 with AJCC T1c, or Stage II or
                                III Hormone Receptor Negative Breast
                                Cancer (NQF #0559).*
                                Adjuvant Hormonal Therapy (NQF
                                #0220).*
Clinical Process/Oncology       Oncology: Radiation Dose Limits
 Care Measures.                 to Normal Tissues (NQF #0382).*
                                Oncology: Plan of Care for Pain
                                (NQF #0383).*
                                Oncology: Pain Intensity
                                Quantified (NQF #0384).*
                                Prostate Cancer: Adjuvant
                                Hormonal Therapy for High Risk Patients
                                (NQF #0390).*
                                Prostate Cancer: Avoidance of
                                Overuse of Bone Scan for Staging Low-
                                Risk Patients (NQF #0389).*
Patient Engagement/Experience   HCAHPS [Hospital Consumer
 of Care.                       Assessment of Healthcare Providers and
                                Systems Survey] (NQF #0166).*
Clinical Effectiveness          External Beam Radiotherapy for
 Measure.                       Bone Metastases (NQF #1822).*
------------------------------------------------------------------------
* Previously finalized measures.
** Proposed for the FY 2018 program and subsequent years in this
  proposed rule.

4. Possible New Quality Measure Topics for Future Years
    Future quality measure topics and quality measure domain areas are 
discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50280). In 
addition, we welcome public comment and specific suggestions for 
measure topics addressing the following CMS Quality Strategy domains: 
Making care affordable; communication and coordination; and working 
with communities to promote best practices of healthy living.

[[Page 24594]]

5. Maintenance of Technical Specifications for Quality Measures
    We maintain technical specifications for the PCHQR Program 
measures, and we periodically update those specifications. The 
specifications may be found on the QualityNet Web site at: https://qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1228774479863.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50281), we described 
a policy under which we use a subregulatory process to make 
nonsubstantive updates to measures used for the PCHQR Program. We are 
not proposing any changes to this policy in this proposed rule.
6. Public Display Requirements
a. Background
    Section 1866(k)(4) of the Act requires the Secretary to establish 
procedures for making the data submitted under the PCHQR Program 
available to the public. Such procedures must ensure that a PCH has the 
opportunity to review the data that are to be made public with respect 
to the PCH prior to such data being made public. Section 1866(k)(4) of 
the Act also provides that the Secretary must report quality measures 
of process, structure, outcome, patients' perspective on care, 
efficiency, and costs of care that relate to services furnished in such 
hospitals on the CMS Web site.
    In order to meet these requirements, in the FY 2013 IPPS/LTCH PPS 
final rule (77 FR 53562 through 53563), we finalized our policy to 
publicly display PCHQR Program data on the Hospital Compare Web site 
(http://www.hospitalcompare.hhs.gov/) and established a preview period 
of 30 days prior to making such data public.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50847 through 
50848), we finalized our proposal to display publicly in 2014 and 
subsequent years the data for two measures. In the FY 2015 IPPS/LTCH 
PPS final rule (79 FR 50282), we finalized our proposal to display 
publicly in 2015 and subsequent years the data for one measure and our 
proposal to display publicly no later than 2017 the data for two 
additional measures. In summary, we have finalized proposals to 
publicly display five PCHQR measures on Hospital Compare, including 
three Cancer Specific Treatment measures and two CDC NHSN HAI measures.

            Summary of Finalized Public Display Requirements
------------------------------------------------------------------------
                    Measures                         Public reporting
------------------------------------------------------------------------
 Adjuvant Chemotherapy is Considered or   2014 and subsequent
 Administered Within 4 Months (120 days) of        years
 Diagnosis to Patients Under the Age of 80 with
 AJCC III (lymph node positive) Colon Cancer
 (NQF #0223).
 Combination Chemotherapy is Considered
 or Administered Within 4 Months (120 days) of
 Diagnosis for Women Under 70 with AJCC T1c, or
 Stage II or III Hormone Receptor Negative
 Breast Cancer (NQF #0559).
 Adjuvant Hormonal Therapy (NQF #0220)..  2015 and subsequent
                                                   years.
 CDC NHSN Central Line-Associated         2017 and subsequent
 Bloodstream Infection (CLABSI) Outcome Measure    years.
 (NQF #0139).
 CDC NHSN Catheter-Associated Urinary
 Tract Infections (CAUTI) Outcome Measure (NQF
 #0138).
------------------------------------------------------------------------

b. Proposed Additional Public Display Requirements
    We are proposing to publicly display six additional PCHQR measures 
beginning in 2016 and for subsequent years:

 Oncology: Radiation Dose Limits to Normal Tissues (NQF #0382)
 Oncology: Plan of Care for Pain (NQF #0383)
 Oncology: Pain Intensity Quantified (NQF #0384)
 Prostate Cancer: Adjuvant Hormonal Therapy for High Risk 
Patients (NQF #0390)
 Prostate Cancer: Avoidance of Overuse of Bone Scan for Staging 
Low-Risk Patients (NQF #0389)
 HCAHPS (NQF #0166)

    We are inviting public comment on these proposals.
7. Form, Manner, and Timing of Data Submission
a. Background
    Section 1866(k)(2) of the Act requires that, beginning with the FY 
2014 PCHQR Program, each PCH must submit to the Secretary data on 
quality measures specified under section 1866(k)(3) of the Act in a 
form and manner, and at a time, as specified by the Secretary.
    Data submission requirements and deadlines for the PCHQR Program 
are generally posted on the QualityNet Web site at: http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier3&cid=1228772864228.
b. Proposed Reporting Requirements for Proposed New Measures: CDC NHSN 
CDI (NQF #1717), CDC NHSN MRSA (NQF #1716), and CDC NHSN HCP (NQF 
#0431) Measures
    We are proposing that PCHs submit CDC NHSN CDI, MRSA, and HCP 
measure data for all patients to the CDC through the NHSN database. 
This is the same procedural/reporting mechanism used for the CDC NHSN 
CLABSI and CAUTI measures that we finalized in the FY 2013 IPPS/LTCH 
PPS final rule (77 FR 53563 through 53564) and for the CDC SSI measure 
that we finalized in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50848 
through 50850). The data submission and reporting procedures have been 
set forth by the CDC for NHSN participation in general and for 
submission of the CDC NHSN CDI, MRSA, and HCP measures to NHSN. We 
refer readers to the CDC's Web site (http://www.cdc.gov/nhsn/cms/index.html) for detailed data submission and reporting procedures.
    We are proposing to adopt a quarterly submission process for the 
CDC NHSN CDI and MRSA measures as shown in the table below. We have 
successfully implemented this reporting mechanism in the Hospital IQR 
Program (77 FR 53539), and we strongly believe that this type of data 
submission is the most feasible option because PCHs are currently 
reporting the CDC NHSN CAUTI, CLABSI, and CDC SSI measures to the CDC 
NHSN this way.

[[Page 24595]]



    Proposed CDC NHSN CDI (NQF #1717) and CDC NHSN MRSA (NQF #1716) Measures Reporting Periods and Submission
                                  Timeframes Beginning With the FY 2018 Program
----------------------------------------------------------------------------------------------------------------
       Program year (FY)               Reporting periods (CY)               Data submission deadlines (CY)
----------------------------------------------------------------------------------------------------------------
2018..........................  Q1 2016 events......................  August 15, 2016.
                                (January 1, 2016-March 31, 2016)....
                                Q2 2016 events......................  November 15, 2016.
                                (April 1, 2016-June 30, 2016).......
                                Q3 2016 events......................  February 15, 2017.
                                (July 1, 2016-September 30, 2016)...
                                Q4 2016 events......................  May 15, 2017.
                                (October 1, 2016-December 31, 2016).
Subsequent Years..............  Q1 events...........................  August 15 of year two years before the
                                (January 1-March 31 of year 2 years    program year.
                                 before the program year)..
                                Q2 events...........................  November 15 of year 2 years before the
                                (April 1-June 30 of year 2 years       program year.
                                 before the program year)..
                                Q3 events...........................  February 15 of year 1 year before the
                                (July 1-September 30 of year 2 years   program year.
                                 before the program year)..
                                Q4 events...........................  May 15 of
                                (October 1-December 31 of year 2      year 1 year before the program year.
                                 years before the program year)..
----------------------------------------------------------------------------------------------------------------

    For the CDC NHSN HCP measure, we are proposing that data be 
submitted annually by May 15 of the applicable year as shown in the 
table below. The vaccination period runs from October through March. 
The proposed reporting period for FY 2018 will include Q4 2016 and Q1 
2017 counts submitted by May 15, 2017.

Proposed CDC NHSN HCP (NQF #0431) Measure Reporting Periods and Submission Timeframes Beginning With the FY 2018
                                                     Program
----------------------------------------------------------------------------------------------------------------
      Program year  (FY)               Reporting periods  (CY)              Data submission deadlines  (CY)
----------------------------------------------------------------------------------------------------------------
2018..........................  Q4 2016 counts......................  May 15, 2017.
                                (October 1, 2016--December 31,
                                 2016)..
                                Q1 2017 counts......................
                                (January 1, 2017--March 31, 2017)...
Subsequent Years..............  Q4 counts...........................  May 15 of year 1 year before the program
                                (October 1--December 31 of year 2      year.
                                 years before the program year)..
                                Q1 counts...........................
                                (January 1--March 31 of year 1 year
                                 before the program year)..
----------------------------------------------------------------------------------------------------------------

    We are inviting public comments on these proposals.
    As specified by CDC, the CDC NHSN CDI, MRSA, and HCP measures are 
reported on a facility-wide basis.203 204 Accordingly, we 
are not proposing a sampling methodology for these measures because CDC 
requirements are to collect data on all patients or HCP in the 
facility. However, measures specifications could be technically updated 
by the measure steward (CDC). We refer readers to the CDC Web site for 
technical changes and/or updates (http://www.cdc.gov/nhsn/acute-care-hospital/index.html).
---------------------------------------------------------------------------

    \203\ CDC Multidrug--Resistant Organism & Clostridium difficile 
Infection (MDRO/CDI) Module. Available at: http://www.cdc.gov/nhsn/PDFs/pscManual/12pscMDRO_CDADcurrent.pdf.
    \204\ CDC HCP Vaccination Module. Available at: http://www.cdc.gov/nhsn/PDFs/HPS-manual/vaccination/HPS-flu-vaccine-protocol.pdf.
---------------------------------------------------------------------------

    We also intend to issue guidance to PCHs that will provide 
additional clarity regarding the specific data submission deadlines 
that we previously finalized for certain PCHQR measures. This guidance 
will be issued through the QualityNet Web site.

C. Long-Term Care Hospital Quality Reporting Program (LTCH QRP)

1. Background and Statutory Authority
    Section 3004(a) of the Affordable Care Act amended section 
1886(m)(5) of the Act, requiring the Secretary to establish the Long-
Term Care Hospital Quality Reporting Program (LTCH QRP). This program 
applies to all hospitals certified by Medicare as LTCHs. Beginning with 
the FY 2014 payment determination and subsequent years, the Secretary 
is required to reduce any annual update to the standard Federal rate 
for discharges occurring during such fiscal year by 2 percentage points 
for any LTCH that does not comply with the requirements established by 
the Secretary.
    The Act requires that, for the FY 2014 payment determination and 
subsequent years, each LTCH submit data on quality measures specified 
by the Secretary in a form and manner, and at a time, specified by the 
Secretary. The Secretary is required to specify quality measures that 
are endorsed by the entity with a contract under section 1890(a) of the 
Act. This entity is currently the NQF. Information regarding the NQF is 
available at: http://www.qualityforum.org/Measuring_Performance/Measuring_Performance.aspx. The Act authorizes an exception under which 
the Secretary may specify non-NQF-endorsed quality measures in the case 
of specified areas or medical topics determined appropriate by the 
Secretary for which a feasible or practical measure has not been 
endorsed by the NQF, as long as due consideration is given to measures 
that have been endorsed or adopted by a consensus organization 
identified by the Secretary. We refer readers to the FY 2015 IPPS/LTCH 
PPS final rule (79 FR

[[Page 24596]]

50286) for a detailed discussion of the history of the LTCH QRP.
    In addition, section 1206(c) of the Pathway for SGR Reform Act of 
2013 added section 1886(m)(5)(D)(iv) of the Act, which requires the 
Secretary to establish, not later than October 1, 2015, a functional 
status quality measure under the LTCH QRP for change in mobility among 
inpatients requiring ventilator support. We refer readers to the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50298) for a detailed discussion 
of the Functional Outcome Measure: Change in Mobility among Long-Term 
Care Hospital Patients Requiring Ventilator Support, which we adopted 
in the LTCH QRP for the FY 2018 payment determination and subsequent 
years to meet the requirements of section 1886(m)(5)(D)(iv) of the Act.
    Finally, the Improving Medicare Post-Acute Care Transformation Act 
of 2014 (Pub. L. 113-185) (the IMPACT Act of 2014) amended the Act in 
ways that affect the LTCH QRP. Specifically, section 2(a) of the IMPACT 
Act of 2014 added section 1899B of the Act, and section 2(c)(3) of the 
IMPACT Act of 2014 amended section 1886(m)(5) of the Act.
    New section 1899B of the Act is titled Standardized Post-Acute Care 
(PAC) Assessment Data for Quality, Payment and Discharge Planning. 
Under section 1899B(a)(1) of the Act, the Secretary must require post-
acute care (PAC) providers (defined in section 1899B(a)(2)(A) of the 
Act to include HHAs, SNFs, IRFs, and LTCHs) to submit standardized 
patient assessment data in accordance with section 1899B(b) of the Act, 
data on quality measures required under section 1899B(c)(1) of the Act, 
and data on resource use and other measures required under section 
1899B(d)(1) of the Act. The Act also sets out specified application 
dates for each of the measures. The Secretary must specify the quality, 
resource use, and other measures not later than the applicable 
specified application date defined in section 1899B(a)(2)(E) of the 
Act.
    Section 1899B(b) of the Act describes the standardized patient 
assessment data that PAC providers are required to submit in accordance 
with section 1899B(b)(1) of the Act; requires the Secretary, to the 
extent practicable, to match claims data with standardized patient 
assessment data in accordance with section 1899B(b)(2) of the Act; and 
requires the Secretary, as soon as practicable, to revise or replace 
existing patient assessment data to the extent that such data duplicate 
or overlap with standardized patient assessment data, in accordance 
with section 1899B(b)(3) of the Act.
    Sections 1899B(c)(1) and (d)(1) of the Act direct the Secretary to 
specify measures that relate to at least five stated quality domains 
and three stated resource use and other measure domains. Section 
1899B(c)(1) of the Act provides that the quality measures on which PAC 
providers, including LTCHs, are required to submit standardized patient 
assessment data and other necessary data specified by the Secretary 
must be with respect to at least the following domains:
     Functional status, cognitive function, and changes in 
function and cognitive function;
     Skin integrity and changes in skin integrity;
     Medication reconciliation;
     Incidence of major falls; and
     Accurately communicating the existence of and providing 
for the transfer of health information and care preferences of an 
individual to the individual, family caregiver of the individual, and 
providers of services furnishing items and services to the individual 
when the individual transitions (1) from a hospital or CAH to another 
applicable setting, including a PAC provider or the home of the 
individual, or (2) from a PAC provider to another applicable setting, 
including a different PAC provider, hospital, CAH, or the home of the 
individual.
    Section 1899B(c)(2)(A) of the Act provides that, to the extent 
possible, the Secretary must require such reporting through the use of 
a PAC assessment instrument and modify the instrument as necessary to 
enable such use.
    Section 1899B(d)(1) of the Act provides that the resource use and 
other measures on which PAC providers, including LTCHs, are required to 
submit any necessary data specified by the Secretary, which may include 
standardized assessment data in addition to claims data, must be with 
respect to at least the following domains:
     Resource use measures, including total estimated Medicare 
spending per beneficiary;
     Discharge to community; and
     Measures to reflect all-condition risk-adjusted 
potentially preventable hospital readmission rates.
    Sections 1899B(c) and (d) of the Act indicate that data satisfying 
the eight measure domains in the IMPACT Act of 2014 is the minimum data 
reporting requirement. Therefore, the Secretary may specify additional 
measures and additional domains.
    Section 1899B(e)(1) of the Act requires that the Secretary 
implement the quality, resource use, and other measures required under 
sections 1899B(c)(1) and (d)(1) of the Act in phases consisting of 
measure specification, data collection, and data analysis; the 
provision of feedback reports to PAC providers in accordance with 
section 1899B(f) of the Act; and public reporting of PAC providers' 
performance on such measures in accordance with section 1899B(g) of the 
Act. Section 1899B(e)(2) of the Act generally requires that each 
measure specified by the Secretary under section 1899B of the Act be 
NQF-endorsed, but authorizes an exception under which the Secretary may 
select non-NQF-endorsed quality measures in the case of specified areas 
or medical topics determined appropriate by the Secretary for which a 
feasible or practical measure has not been endorsed by the NQF, as long 
as due consideration is given to measures that have been endorsed or 
adopted by a consensus organization identified by the Secretary. 
Section 1899B(e)(3) of the Act provides that the pre-rulemaking process 
required by section 1890A of the Act applies to quality, resource use, 
and other measures specified under sections 1899B(c)(1) and (d)(1) of 
the Act, but authorizes exceptions under which the Secretary may (1) 
use expedited procedures, such as ad hoc reviews, as necessary in the 
case of a measure required with respect to data submissions during the 
1-year period before the applicable specified application date, or (2) 
alternatively, waive section 1890A of the Act in the case of such a 
measure if applying section 1890A of the Act (including through the use 
of expedited procedures) would result in the inability of the Secretary 
to satisfy any deadline specified under section 1899B of the Act with 
respect to the measure.
    Section 1899B(f)(1) of the Act requires the Secretary to provide 
confidential feedback reports to PAC providers on the performance of 
such PAC providers with respect to quality, resource use, and other 
measures required under sections 1899B(c)(1) and (d)(1) of the Act 
beginning 1 year after the applicable specified application date.
    Section 1899B(g) of the Act requires the Secretary to establish 
procedures for making available to the public information regarding the 
performance of individual PAC providers with respect to quality, 
resource use, and other measures required under sections 1899B(c)(1) 
and (d)(1) of the Act beginning not later than 2 years after the 
applicable specified application date. The procedures must ensure, 
including through a process consistent with the

[[Page 24597]]

process applied under section 1886(b)(3)(B)(viii)(VII) of the Act for 
similar purposes, that each PAC provider has the opportunity to review 
and submit corrections to the data and information that are to be made 
public with respect to the PAC provider prior to such data being made 
public.
    Section 1899B(h) of the Act sets out requirements for removing, 
suspending, or adding quality, resource use, and other measures 
required under sections 1899B(c)(1) and (d)(1) of the Act.
    Section 1899B(i) of the Act requires that not later than January 1, 
2016, and periodically thereafter (but not less frequently than once 
every 5 years), the Secretary must promulgate regulations to modify the 
Medicare conditions of participation (CoPs) and subsequent 
interpretative guidance applicable to PAC providers, hospitals, and 
CAHs to, among other things, take into account quality, resource use, 
and other measures in the discharge planning process.
    Section 1899B(j) of the Act requires the Secretary to allow for 
stakeholder input, such as through town halls, open door forums, and 
mailbox submissions, before the initial rulemaking process to implement 
section 1899B of the Act.
    Section 2(c)(3) of the IMPACT Act of 2014 amended section 
1886(m)(5) of the Act to address the payment consequences for LTCHs 
with respect to the additional data which LTCHs are required to submit 
under section 1899B of the Act. This section added new sections 
1886(m)(5)(F) and (G) to the Act and made conforming changes. New 
section 1886(m)(5)(F) of the Act requires LTCHs (other than a hospital 
classified under section 1886(d)(1)(B)(iv)(II)) of the Act to submit 
the following additional data: (1) For the fiscal year beginning on the 
applicable specified application date and subsequent years, data on the 
quality, resource use, and other measures required under sections 
1899B(c)(1) and (d)(1) of the Act; and (2) for FY 2019 and subsequent 
years, the standardized patient assessment data required under section 
1899B(b)(1) of the Act. Such data must be submitted in the form and 
manner, and at the time, specified by the Secretary. Finally, new 
section 1886(m)(5)(G) of the Act generally provides that to the extent 
that the additional data required under section 1886(m)(5)(F) of the 
Act duplicates other data required under section 1886(m)(5)(C) of the 
Act, submission of the former must be in lieu of submission of the 
latter.
    As stated above, the IMPACT Act of 2014 adds a new section 1899B to 
the Act that imposes new data reporting requirements for certain post-
acute care (PAC) providers, including LTCHs. Sections 1899B(c)(1) and 
1899B(d)(1) of the Act collectively require that the Secretary specify 
quality measures and resource use and other measures with respect to 
certain domains not later than the specified application date that 
applies to each measure domain and PAC provider setting. Section 
1899B(a)(2)(E) of the Act delineates the specified application dates 
for each measure domain and PAC provider. The IMPACT Act of 2014 also 
amends various other sections of the Act, including section 1886(m)(5) 
of the Act, to require the Secretary to reduce the otherwise applicable 
PPS payment to a PAC provider that does not report the new data in a 
form and manner, and at a time, specified by the Secretary. For LTCHs, 
amended section 1886(m)(5)(A)(i) of the Act would require the Secretary 
to reduce the payment update for any LTCH that does not satisfactorily 
submit the new required data.
    Under the current LTCH QRP, the general timeline and sequencing of 
measure implementation occurs as follows: Specification of measures; 
proposal and finalization of measures through notice-and-comment 
rulemaking; LTCH submission of data on the adopted measures; analysis 
and processing of the submitted data; notification to LTCHs regarding 
their quality reporting compliance with respect to a particular rate 
year; consideration of any reconsideration requests; and imposition of 
a payment reduction in a particular rate year for failure to 
satisfactorily submit data with respect to that rate year. Any payment 
reductions that are taken with respect to a rate year begin 
approximately one year after the end of the data submission period for 
that rate year and approximately two years after we first adopt the 
measure.
    To the extent that the IMPACT Act of 2014 could be interpreted to 
shorten this timeline so as to require us to reduce an LTCH's PPS 
payment for failure to satisfactorily submit data on a measure 
specified under section 1899B(c)(1) or (d)(1) of the Act beginning with 
the same rate year as the specified application date for that measure, 
such a timeline would not be feasible. The current timeline discussed 
above reflects operational and other practical constraints, including 
the time needed to specify and adopt valid and reliable measures, 
collect the data, and determine whether an LTCH has complied with our 
quality reporting requirements. It also takes into consideration our 
desire to give LTCHs enough notice of new data reporting obligations so 
that they are prepared to timely start reporting the data. Therefore, 
we intend to follow the same timing and sequence of events for measures 
specified under sections 1899B(c)(1) and (d)(1) of the Act that we 
currently follow for other measures specified under the LTCH QRP. We 
intend to specify each of these measures no later than the specified 
application dates set forth in section 1899B(a)(2)(E) of the Act and 
are proposing to adopt them consistent with the requirements in the Act 
and Administrative Procedure Act. To the extent that we finalize a 
proposal to adopt a measure for the LTCH QRP that satisfies an IMPACT 
Act of 2014 measure domain, we intend to require LTCHs to report data 
on the measure for the rate year that begins two years after the 
specified application date for that measure. Likewise, we intend to 
require LTCHs to begin reporting any other data specifically required 
under the IMPACT Act of 2014 for the rate year that begins two years 
after we adopt requirements that would govern the submission of that 
data.
2. General Considerations Used for Selection of Quality, Resource Use, 
and Other Measures for the LTCH QRP
    We refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50286 through 50287) for a detailed discussion of the considerations we 
use for the selection of LTCH QRP quality measures. In this proposed 
rule, we apply the same considerations to the selection of quality, 
resource use, and other measures required under section 1899B of the 
Act for the LTCH QRP, in addition to the considerations discussed 
below.
    The quality measures we are proposing address some of the measure 
domains that the Secretary is required to specify under sections 
1899B(c)(1) and (d)(1) of the Act. The totality of the measures 
considered to meet the requirements of the IMPACT Act of 2014 will 
evolve, and additional measures will be proposed over time as they 
become available.
    To meet the first specified application date applicable to LTCHs 
under section 1899B(a)(2)(E) of the Act, which is October 1, 2016, we 
have focused on measures that:
     Correspond to a measure domain in section 1899B(c)(1) or 
(d)(1) of the Act and are setting-agnostic: For example, falls with 
major injury and the incidence of pressure ulcers;
     Are currently adopted for one or more of our PAC quality 
reporting programs that are already either NQF-endorsed and in place or 
finalized for

[[Page 24598]]

use, or already previewed by the MAP with support;
     Minimize added burden on LTCHs;
     Minimize or avoid, to the extent feasible, revisions to 
the existing items in assessment tools currently in use (for example, 
the LTCH CARE Data Set);
     Avoid, where possible, duplication of existing assessment 
items.
    In our selection and specification of measures, we employ a 
transparent process in which we seek input from stakeholders and 
national experts and engage in a process that allows for pre-rulemaking 
input on each measure, as required by section 1890A of the Act. This 
process is based on a private-public partnership, and it occurs via the 
MAP. The MAP is composed of multi-stakeholder groups convened by the 
NQF, our current contractor under section 1890 of the Act, to provide 
input on the selection of quality and efficiency measures described in 
section 1890(b)(7)(B) of the Act. The NQF must convene these 
stakeholders and provide us with the stakeholders' input on the 
selection of such measures. We, in turn, must take this input into 
consideration in selecting such measures. In addition, the Secretary 
must make available to the public by December 1 of each year a list of 
such measures that the Secretary is considering under title XVIII of 
the Act.
    As discussed in section VIII.C.1. of the preamble of this proposed 
rule, section 1899B(e)(3) of the Act provides that the pre-rulemaking 
process required by section 1890A of the Act applies to the measures 
required under section 1899B, subject to certain exceptions for 
expedited procedures or, alternatively, waiver of section 1890A of the 
Act.
    We initiated an Ad Hoc MAP process for the review of the quality 
measures under consideration for proposal in preparation for adoption 
of those quality measures into the LTCH QRP that are required by the 
IMPACT Act of 2014, and which must be specified by October 1, 2016. The 
List of Measures under Consideration (MUC List) under the IMPACT Act of 
2014 was made available to the public for comment during the MAP 
Meeting on February 9, 2015 (http://www.meeting-support.com/downloads/703163/4524/PACLTC%20Ad%20Hoc%20Slides.pdf). Under the IMPACT Act of 
2014, these measures must be standardized so they can be applied across 
PAC settings and must correspond to measure domains specified in 
sections 1899B(c)(1) and (d)(1) of the IMPACT Act of 2014. The specific 
cross-setting application of the measures under consideration for each 
such measure is discussed in the MAP Off-Cycle Deliberations 2015: 
Measures under Consideration to Implement Provisions of the IMPACT Act: 
Final Report available at: http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx. The MAP reviewed 
each IMPACT Act of 2014-related quality measure proposed in this 
proposed rule for the LTCH QRP, in light of its intended cross-setting 
use. We refer readers to section VIII.C.6. of the preamble of this 
proposed rule for more information on the MAP's recommendations.
    As discussed in section VIII.C.1. of the preamble of this proposed 
rule, above, section 1899B(j) of the Act requires that we allow for 
stakeholder input as part of the pre-rulemaking process. To meet this 
requirement, we provided the following opportunities for stakeholder 
input: (1) Our measure development contractor convened a technical 
expert panel (TEP) that included stakeholder experts and patient 
representatives on February 3, 2015; (2) we provided two separate 
listening sessions on February 10, 2015 and March 5, 2015; (3) we 
sought public input during the February 2015 Ad Hoc MAP process 
provided for the sole purpose of reviewing the measures we are 
proposing in reaction to the IMPACT Act of 2014; and (4) we sought 
public comment as part of our NQF measure maintenance submissions. In 
addition, we implemented a public mail box for the submission of 
comments in January 2015, [email protected], which is 
accessible from our post-acute care quality initiatives Web site: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/IMPACT-Act-of-2014-and-Cross-Setting-Measures.html, and held a National Stakeholder Special 
Open Door Forum to seek input on the measures on February 25, 2015.
    For measures that do not have NQF endorsement, or which are not 
fully supported by the MAP for the LTCH QRP, we are proposing measures 
that most closely align with the national priorities discussed in the 
FY 2015 IPPS/LTCH PPS final rule (79 FR 50286 through 50287), and for 
which the MAP supports the measure concept. Further discussion as to 
the importance and high-priority status of these measures in the LTCH 
setting is included under each quality measure proposal in the preamble 
of this proposed rule. In addition, for measures not endorsed by the 
NQF, we have sought, to the extent practicable, to adopt measures that 
have been endorsed or adopted by a national consensus organization, 
recommended by multi-stakeholder organizations, and/or developed with 
the input of providers, purchasers/payers, and other stakeholders.
3. Policy for Retention of LTCH QRP Measures Adopted for Previous 
Payment Determinations
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53614 through 
53615), for the LTCH QRP, we adopted a policy that once a quality 
measure is adopted, it will be retained for use in subsequent years, 
unless otherwise stated. For the purpose of streamlining the rulemaking 
process, when we initially adopt a measure for the LTCH QRP for a 
payment determination, this measure will be automatically adopted for 
all subsequent years or until we propose to remove, suspend, or replace 
the measure. For further information on how measures are considered for 
removal, we refer readers to the FY 2013 IPPS/LTCH PPS final rule (77 
FR 53614 through 53615).
    In this proposed rule, we are not proposing any changes to this 
policy for retaining LTCH QRP measures adopted for previous payment 
determinations.
4. Policy for Adopting Changes to LTCH QRP Measures
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53615 through 
53616), we finalized a policy that if the NQF updates an endorsed 
measure that we have adopted for the LTCH QRP in a manner that we 
consider to not substantively change the nature of the measure, we will 
use a subregulatory process to incorporate those updates to the measure 
specifications that apply to the LTCH QRP. Substantive changes will be 
proposed and finalized through rulemaking. We refer readers to the FY 
2013 IPPS/LTCH PPS final rule (77 FR 53615 through 53616) for further 
information on what constitutes substantive and nonsubstantive changes 
to a measure. We are not proposing any changes to the policy for 
adopting changes to LTCH QRP measures.
5. Previously Adopted Quality Measures
a. Previously Adopted Quality Measures for the FY 2015 and FY 2016 
Payment Determinations and Subsequent Years
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53624 through 
53636), for the FY 2014 payment determination and subsequent years, we 
adopted updated versions of National Health Safety Network (NHSN) 
Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure 
(NQF #0138) and the NHSN Central Line-Associated Blood Stream Infection 
(CLABSI) Outcome Measure (NQF #0139). For the FY 2015 payment 
determination and subsequent

[[Page 24599]]

years, we retained the application of Percent of Residents with 
Pressure Ulcers That Are New or Worsened (Short Stay) measure (NQF 
#0678) to the LTCH setting (initially adopted in the FY 2012 IPPS/LTCH 
PPS final rule (76 FR 51745 through 51750)). We also adopted two new 
quality measures for the LTCH QRP for the FY 2016 payment determination 
and subsequent years, in addition to the three previously adopted 
measures (the CAUTI measure, CLABSI measure, and Pressure Ulcer 
measure): (1) Percent of Residents or Patients Who Were Assessed and 
Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF 
#0680); and (2) Influenza Vaccination Coverage among Healthcare 
Personnel (NQF #0431) (77 FR 53624 through 53636).
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50861 through 
50863), we adopted the NQF-endorsed version of the Pressure Ulcer 
measure, Percent of Residents or Patients with Pressure Ulcers That Are 
New or Worsened (Short Stay) measure (NQF #0678), for the LTCH QRP for 
the FY 2015 payment determination and subsequent years.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50289 through 
50305), we revised the data collection and submission period for the 
Percent of Residents or Patients Who Were Assessed and Appropriately 
Given the Seasonal Influenza Vaccine (Short-Stay) measure (NQF #0680).
    Set out below are the quality measures, both previously adopted 
measures retained in the LTCH QRP and measures adopted in FY 2013 and 
FY 2014 IPPS/LTCH PPS final rules, for the FY 2015 and FY 2016 payment 
determinations and subsequent years.

 LTCH QRP Quality Measures Previously Adopted for the FY 2015 and FY 2016 Payment Determinations and Subsequent
                                                      Years
----------------------------------------------------------------------------------------------------------------
            NQF Measure ID                               Measure title                    Payment determination
----------------------------------------------------------------------------------------------------------------
NQF #0138............................  National Health Safety Network (NHSN) Catheter-   FY 2015 and Subsequent
                                        Associated Urinary Tract Infection (CAUTI)        Fiscal Years.
                                        Outcome Measure.
NQF #0139............................  National Health Safety Network (NHSN) Central     FY 2015 and Subsequent
                                        Line-Associated Blood Stream Infection (CLABSI)   Fiscal Years.
                                        Outcome Measure.
NQF #0678............................  Percent of Residents or Patients with Pressure    FY 2015 and Subsequent
                                        Ulcers That Are New or Worsened (Short Stay).     Fiscal Years.
NQF #0680............................  Percent of Residents or Patients Who Were         FY 2016 and Subsequent
                                        Assessed and Appropriately Given the Seasonal     Fiscal Years.
                                        Influenza Vaccine (Short Stay).
NQF #0431............................  Influenza Vaccination Coverage among Healthcare   FY 2016 and Subsequent
                                        Personnel.                                        Fiscal Years.
----------------------------------------------------------------------------------------------------------------

b. Previously Adopted Quality Measures for the FY 2017 and FY 2018 
Payment Determinations and Subsequent Years
    In the FY 2014 IPPS/LTCH PPS final rule, we adopted three 
additional measures for the FY 2017 payment determination and 
subsequent years (78 FR 50863 through 50874) and one additional measure 
for the FY 2018 payment determination and subsequent years (78 FR 50874 
through 50877).
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50289 through 
50305), we: (1) Revised the data collection and submission period for 
the application of the Percent of Residents Experiencing One or More 
Falls with Major Injury (Long Stay) measure (NQF #0674); and (2) 
adopted three new quality measures for the FY 2018 payment 
determination and subsequent years.
    These measures are set out in the table below.

 LTCH QRP Quality Measures Previously Adopted for the FY 2017 and FY 2018 Payment Determinations and Subsequent
                                                      Years
----------------------------------------------------------------------------------------------------------------
            NQF Measure ID                               Measure title                    Payment determination
----------------------------------------------------------------------------------------------------------------
NQF #1716............................  National Healthcare Safety Network (NHSN)         FY 2017 and Subsequent
                                        Facility-Wide Inpatient Hospital-Onset            Years.
                                        Methicillin-Resistant Staphylococcus aureus
                                        (MRSA) Bacteremia Outcome Measure.
NQF #1717............................  National Healthcare Safety Network (NHSN)         FY 2017 and Subsequent
                                        Facility-Wide Inpatient Hospital-Onset            Years.
                                        Clostridium difficile Infection (CDI) Outcome
                                        Measure.
NQF #2512............................  All-Cause Unplanned Readmission Measure for 30    FY 2017 and Subsequent
                                        Days Post[dash]Discharge from Long-Term Care      Years.
                                        Hospitals.
Application of NQF #0674.............  Percent of Residents Experiencing One or More     FY 2018 and Subsequent
                                        Falls with Major Injury (Long Stay).              Years.
NQF #2631 *..........................  Percent of Long-Term Care Hospital Patients with  FY 2018 and Subsequent
                                        an Admission and Discharge Functional             Years.
                                        Assessment and a Care Plan That Addresses
                                        Function.
NQF #2632 *..........................  Functional Outcome Measure: Change in Mobility    FY 2018 and Subsequent
                                        among Long-Term Care Hospital Patients            Years.
                                        Requiring Ventilator Support.
Not NQF endorsed.....................  National Healthcare Safety Network (NHSN)         FY 2018 and Subsequent
                                        Ventilator-Associated Event (VAE) Outcome         Years.
                                        Measure.
----------------------------------------------------------------------------------------------------------------
* Under review at NQF. We refer readers to: http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73867,
  NQF #2631 and NQF #2632.

6. Previously Adopted LTCH QRP Quality Measures Proposed for the FY 
2018 Payment Determination and Subsequent Years
    For the FY 2018 payment determination and subsequent years, in 
addition to the measures we are retaining under our policy described in 
VIII.C.3. of the preamble of this proposed rule, we are proposing four 
quality measures to reflect the NQF endorsement of one measure and to 
meet the requirements of the IMPACT Act of 2014. These proposed 
measures are: (a) All-Cause Unplanned Readmission Measure for 30 Days 
Post-Discharge from LTCHs (NQF #2512) to reflect NQF endorsement; (b) 
Percent of

[[Page 24600]]

Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short Stay) (NQF #0678) to meet the requirements of the IMPACT Act of 
2014; (c) an application of Percent of Residents Experiencing One or 
More Falls with Major Injury (Long Stay) (NQF #0674) to meet the 
requirements of the IMPACT Act of 2014; and (d) an application of 
Percent of LTCH Patients with an Admission and Discharge Functional 
Assessment and a Care Plan That Addresses Function (NQF #2631; under 
NQF review) to meet the requirements of the IMPACT Act of 2014. These 
quality measures are discussed in more detail below.
a. Proposal To Reflect NQF Endorsement: All-Cause Unplanned Readmission 
Measure for 30 Days Post-Discharge From LTCHs (NQF #2512)
    The All-Cause Unplanned Readmission Measure for 30 Days Post-
Discharge from LTCHs (NQF #2512) was adopted for use in the LTCH QRP in 
the FY 2014 IPPS/LTCH PPS final rule (78 FR 50868 through 50874). We 
are proposing to adopt this measure to reflect that it is NQF-endorsed 
for use in the LTCH setting as of December 2014. Current specifications 
of this NQF-endorsed measure are available for download on the NQF Web 
site at: http://www.qualityforum.org/QPS/2512.
    As adopted in the FY 2014 IPPS/LTCH PPS final rule, this is a 
Medicare FFS claims-based measure, and LTCHs are not required to report 
any additional data to CMS. Because we would calculate this measure 
based on claims data that are already reported to the Medicare program 
for payment purposes, we believe there would be no additional data 
collection burden on LTCHs resulting from our implementation of this 
measure as part of the LTCH QRP. In the FY 2014 IPPS/LTCH PPS final 
rule, we stated that we will calculate this measure using claims data 
beginning with FY 2013 and FY 2014 and provide initial feedback to 
LTCHs prior to public reporting of this measure. However, the NQF-
endorsed measure (NQF #2512) is based on 2 consecutive calendar years 
of Medicare FFS claims data. Therefore, in addition to our proposal to 
adopt the NQF-endorsed version of this measure, we are proposing that 
the initial calculation of the measure and feedback to LTCHs, prior to 
public reporting of this measure, would be based on CY 2013 and CY 2014 
Medicare FFS claims data related to readmissions post-LTCH discharge.
    The description of this measure provided in the FY 2014 IPPS/LTCH 
PPS final rule (78 FR 50868 through 50874) noted this measure is the 
ratio of the number of risk-adjusted predicted unplanned readmissions 
for each LTCH, including the estimated facility effect, to the average 
number of risk-adjusted predicted unplanned readmissions for the same 
patients if treated at a facility with the average effect on 
readmissions. This ratio is referred to as the standardized risk ratio 
or SRR. The NQF-endorsed specifications compute the risk-standardized 
readmission rate (RSRR) for this measure. The RSRR is the SRR 
multiplied by the overall national raw readmission rate for all LTCH 
stays; it is expressed as a percentage rate rather than a ratio.
    This measure, which was developed to harmonize with the Hospital-
Wide All-Cause Unplanned Readmission Measure (NQF #1789) that is 
currently in use in the Hospital IQR Program, continues to use the CMS 
Planned Readmission Algorithm as the main component for identifying 
planned readmissions. This algorithm was refined in the FY 2015 IPPS/
LTCH PPS final rule (79 FR 50211 through 50216). The All-Cause 
Unplanned Readmission Measure for 30 Days Post Discharge from LTCHs 
(NQF #2512) for the LTCH QRP will utilize the most recently updated 
version of the algorithm. A complete description of the CMS Planned 
Readmission Algorithm, which includes lists of planned diagnoses and 
procedures, can be found on the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/Measure-Methodology.html. The additional post-
acute care planned readmission types specified for this measure remain 
the same as when first adopted through the FY 2014 IPPS/LTCH PPS final 
rule. Documentation on the additional post-acute care planned 
readmissions for this measure is available at: http://www.qualityforum.org/ProjectTemplateDownload.aspx?SubmissionID=2512.
    We are inviting public comments in response to (1) our proposal to 
adopt the NQF-endorsed version of All-Cause Unplanned Readmission 
Measure for 30 Days Post Discharge from LTCHs (NQF #2512) for the LTCH 
QRP and (2) our proposal that the initial feedback to LTCHs, prior to 
public reporting of this measure, would be based on CY 2013 and CY 2014 
Medicare FFS claims data related to readmissions post-LTCH discharge.
b. Proposal To Address the IMPACT Act of 2014: Quality Measure 
Addressing the Domain of Skin Integrity and Changes in Skin Integrity: 
Percent of Residents or Patients With Pressure Ulcers That Are New or 
Worsened (Short Stay) (NQF #0678)
    Section 1899B(c)(1) of the Act directs the Secretary to specify 
quality measures on which PAC providers are required under the 
applicable reporting provisions to submit standardized patient 
assessment data and other necessary data specified by the Secretary 
with respect to five quality domains, one of which is skin integrity 
and changes in skin integrity. The specified application date by which 
the Secretary must specify quality measures to address this domain for 
IRFs, SNFs, and LTCHs is October 1, 2016, and for HHAs is January 1, 
2017. To satisfy these requirements, we are proposing to adopt the 
Percent of Residents or Patients with Pressure Ulcers that are New or 
Worsened (Short-Stay) (NQF #0678) measure, that we have already adopted 
for the LTCH QRP, as a cross-setting quality measure that satisfies the 
domain of skin integrity and changes in skin integrity. The reporting 
of data for this measure would affect the payment determination for the 
FY 2018 payment determination and subsequent years. In the LTCH 
setting, the measure assesses the percent of patients with Stage 2 
through Stage 4 pressure ulcers that are new or worsened since 
admission.
    As described in the FY 2012 IPPS/LTCH PPS final rule (76 FR 51754 
through 51756), pressure ulcers are high-cost adverse events and are an 
important measure of quality. For information on the detailed rationale 
for relevance, evidence, appropriateness, importance, and applicability 
of this quality measure in the LTCH QRP, we refer readers to the FY 
2012 IPPS/LTCH PPS final rule (76 FR 51754 through 51756) and the FY 
2014 IPPS/LTCH PPS final rule (78 FR 50861 through 50863). Measure 
specifications are available on the NQF Web site at: http://www.qualityforum.org/QPS/0678.
    The IMPACT Act of 2014 requires the implementation of quality 
measures and resource use and other measures that are standardized and 
interoperable across PAC settings as well as the reporting of 
standardized patient assessment data and other necessary data specified 
by the Secretary. This requirement is in line with the NQF Steering 
Committee report, which stated that ``to understand the impact of 
pressure ulcers across settings, quality measures addressing 
prevention, incidence, and prevalence of pressure ulcers must be 
harmonized

[[Page 24601]]

and aligned.'' \205\ The Percent of Residents or Patients with Pressure 
Ulcers That Are New or Worsened (Short Stay) (NQF #0678) measure is 
NQF-endorsed and has been successfully implemented using a harmonized 
set of data elements in three PAC settings (LTCHs, IRFs, and SNFs). As 
discussed in section VIII.C.6.b. of the preamble of this proposed rule, 
above, an application of this measure was adopted for the LTCH QRP in 
the FY 2012 IPPS/LTCH PPS final rule (76 FR 51753 through 51756) for 
the FY 2014 payment determination, and the current NQF-endorsed version 
of the measure was adopted in the FY 2014 IPPS/LTCH PPS final rule (78 
FR 50861 through 50863) for the FY 2015 payment determination and 
subsequent years. The measure has been in use in the LTCH QRP since 
October 1, 2012, and currently, LTCHs are submitting data for this 
measure using the LTCH Continuity Assessment Record and Evaluation 
(CARE) Data Set.
---------------------------------------------------------------------------

    \205\ National Quality Forum. National voluntary consensus 
standards for developing a framework for measuring quality for 
prevention and management of pressure ulcers. April 2008. Available 
at: http://www.qualityforum.org/Projects/Pressure_Ulcers.aspx.
---------------------------------------------------------------------------

    The Percent of Residents or Patients with Pressure Ulcers That Are 
New or Worsened (Short Stay) (NQF #0678) measure was adopted for use in 
the IRF Quality Reporting Program (QRP) in the FY 2012 IRF PPS final 
rule (76 FR 47876 through 47878) for the FY 2014 payment determination 
and subsequent years and has been successfully submitted by IRFs using 
the Inpatient Rehabilitation Facility--Patient Assessment Instrument 
(IRF-PAI) since October 2012. It has also been implemented in the CMS 
Nursing Home Quality Initiative, using the Minimum Data Set (MDS) 
Version 3.0 since 2011, and is currently publicly reported on CMS' 
Nursing Home Compare at: http://www.medicare.gov/nursinghomecompare/search.html.
    A TEP convened by our measure development contractor in February 
2015, provided input on the technical specifications of this quality 
measure, as well as the applicability of this measure as a cross-
setting measure across post-acute care settings, including the LTCH 
setting, to meet the requirements of the IMPACT Act of 2014. The TEP 
supported the applicability of this measure as a cross-setting measure 
across post-acute care settings and also supported our efforts to 
standardize items for data collection and submission of this measure as 
well as our efforts to standardize the measure for cross-setting 
development. In addition, the MAP met on February 9, 2015, and provided 
input to CMS on the measure. The MAP supported the use of Percent of 
Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short Stay) (NQF #0678) measure in the LTCH QRP as a cross-setting 
quality measure. More information about the MAP's recommendations for 
this measure is included in The MAP Off-Cycle Deliberations 2015: 
Measures under Consideration to Implement Provisions of the IMPACT Act: 
Final Report which is available at: http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx.
    We are proposing that data collection for this measure continue to 
occur through the LTCH CARE Data Set submitted through the CMS Quality 
Improvement and Evaluation System (QIES) Assessment Submission and 
Processing (ASAP) system. LTCHs have been submitting data on the 
Percent of Residents or Patients with Pressure Ulcers That Are New or 
Worsened (Short Stay) (NQF #0678) measure through the LTCH CARE Data 
Set since October 2012. By building on the existing reporting and 
submission infrastructure for LTCHs, we intend to minimize the 
administrative burden related to data collection and submission for 
this measure under the LTCH QRP. For more information on LTCH QRP 
reporting using the QIES ASAP system, we refer readers to our Web site 
at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html.
    We are proposing that data collected using standardized items 
through the LTCH CARE Data Set would continue to be used to calculate 
this quality measure. LTCH CARE Data Set items used to identify new or 
worsened pressure ulcers consist of: M0800A (Worsening in Pressure 
Ulcer Status Since Prior Assessment, Stage 2); M0800B (Worsening in 
Pressure Ulcer Status Since Prior Assessment, Stage 3); and M0800C 
(Worsening in Pressure Ulcer Status Since Prior Assessment, Stage 4). 
In addition, we are proposing to continue to use items from the LTCH 
CARE Data Set to risk-adjust this quality measure. These items consist 
of: GG0160C \206\ (Functional Mobility; Lying to Sitting on Side of 
Bed), H0400 (Bowel Continence); I0900 (Peripheral Vascular Disease 
(PVD) or Peripheral Arterial Disease (PAD); I2900 (Diabetes Mellitus), 
K0200A (Height); and K0200B (Weight). More information about the LTCH 
CARE Data Set items is available in the LTCH QRP Manual available at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/index.html.
---------------------------------------------------------------------------

    \206\ For the April 1, 2016 release of LTCH CARE Data Set, this 
item will be renumbered to GG0170C.
---------------------------------------------------------------------------

    The specifications and data elements for the Percent of Residents 
or Patients with Pressure Ulcers That Are New or Worsened (Short Stay) 
(NQF #0678) measure for LTCHs are available in the LTCH QRP Manual at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/index.html.
    We are inviting public comment on our proposal to adopt the Percent 
of Residents or Patients with Pressure Ulcers That Are New or Worsened 
(Short Stay) (NQF #0678) measure for the FY 2018 payment determination 
and subsequent years to fulfill the requirements of the IMPACT Act of 
2014.
c. Proposal To Address the IMPACT Act of 2014: Quality Measure 
Addressing the Domain of Incidence of Major Falls: Application of 
Percent of Residents Experiencing One or More Falls With Major Injury 
(Long Stay) (NQF #0674)
    Section 1899B of the Act directs the Secretary to specify quality 
measures on which PAC providers are required under the applicable 
reporting provisions to submit standardized patient assessment data and 
other necessary data specified by the Secretary with respect to five 
quality domains, one of which is the incidence of major falls. The 
specified application date by which the Secretary must specify quality 
measures to address this domain for IRFs, SNFs, and LTCHs is October 1, 
2016, and for HHAs is January 1, 2019. To satisfy these requirements, 
we are proposing to adopt an application of the Percent of Residents 
Experiencing One or More Falls with Major Injury (Long Stay) (NQF 
#0674) measure in the LTCH QRP as a cross-setting quality measure that 
addresses the domain of incidence of major falls. The purpose of our 
proposal is to establish this measure's use as a cross-setting measure 
that satisfies the required adoption of such a measure under the domain 
of falls with major injury. There is no difference between this measure 
and the measure we previously adopted, beyond the proposed intent to 
use the measure to satisfy the requirements of the IMPACT Act of 2014. 
Data collection would start on April 1, 2016. The reporting of data for 
this measure would affect the

[[Page 24602]]

payment determination for FY 2018 and subsequent years.
    For the LTCH setting, this measure would report the percentage of 
patients who experienced one or more falls with major injury during the 
LTCH stay. This measure was developed by CMS and is NQF-endorsed, 
currently for long-stay residents of nursing facilities. It was adopted 
for the LTCH QRP in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50874 
through 50877). In the FY 2015 IPPS/LTCH PPS final rule, we adopted a 
revised start for data collection of April 1, 2016 and affecting FY 
2018 payment determination and we adopted data collection and 
submission timelines for the FY 2018 payment determination and 
subsequent years. For information on the detailed rationale for 
relevance, evidence, appropriateness, importance, and applicability of 
this quality measure in the LTCH QRP, we refer readers to these final 
rules.
    Measure specifications are available on the NQF Web site at: http://www.qualityforum/QPS/0674.
    The IMPACT Act of 2014 requires the implementation of quality 
measures and resource use and other measures that are standardized and 
interoperable across PAC settings as well as the reporting of 
standardized patient assessment data and other necessary data specified 
by the Secretary. The Percent of Residents Experiencing One or More 
Falls with Major Injury (Long Stay) (NQF #0674) measure is NQF-endorsed 
for long-stay residents of nursing facilities and has been successfully 
implemented in such settings. The NQF-endorsed measure has been in use 
as part of the CMS Nursing Home Quality Initiative since 2011. In 
addition, the measure is currently reported on the CMS Nursing Home 
Compare Web site at: http://www.medicare.gov/nursinghomecompare/search.html. As noted previously, this measure was adopted for use in 
the LTCH QRP in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50874 
through 50877). In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50290 
through 50291), we revised the data collection start date for this 
measure with data collection to begin starting April 1, 2016, and we 
adopted data collection and submission timelines for the FY 2018 
payment determination and subsequent years.
    We reviewed the NQF's consensus endorsed measures and did not 
identify any NQF-endorsed cross-setting quality measures focused on 
falls with major injury applicable to multiple post-acute care 
settings. We are unaware of any other cross-setting quality measures 
for falls with major injury that have been endorsed or adopted by 
another consensus organization. Therefore, we are proposing an 
application of the measure, the Percent of Residents Experiencing One 
or More Falls with Major Injury (Long Stay) (NQF #0674) measure under 
the Secretary's authority to select non-NQF-endorsed measure.
    A TEP convened by our measure development contractor provided input 
on the measure specifications, as well as the feasibility and clinical 
appropriateness of implementing the measure across post-acute care 
settings, including the LTCH setting. The TEP supported the 
implementation of this measure across post-acute care settings and also 
supported CMS' efforts to standardize this measure for cross-setting 
development. In addition, the MAP met on February 9, 2015, and provided 
input to CMS on the measure. The MAP conditionally supported the use of 
an application of the Percent of Residents Experiencing One or More 
Falls with Major Injury (Long Stay) (NQF #0674) measure in the LTCH QRP 
as a cross-setting quality measure. More information about the MAP's 
recommendations for this measure is included in The MAP Off-Cycle 
Deliberations 2015: Measures under Consideration to Implement 
Provisions of the IMPACT Act: Final Report which is available at: 
http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx.
    More information on the Percent of Residents Experiencing One or 
More Falls with Major Injury (Long Stay) (NQF #0674) measure can be 
found on the NQF Web site at: http://www.qualityforum.org/QPS/0674. 
Updated specifications and details regarding the changes made to 
further harmonize this measure across post-acute care settings are 
located at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/index.html.
    We are proposing that data for this proposed quality measure be 
collected using the LTCH CARE Data Set, with submission through the 
QIES ASAP system. For more information on LTCH QRP reporting through 
the QIES ASAP system, we refer readers to the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html. Data 
collected through a revised LTCH CARE Data Set would be used to 
calculate this quality measure. Consistent with the LTCH CARE Data Set 
reporting requirements, the application of the Percent of Residents 
Experiencing One or More Falls with Major Injury (Long Stay) (NQF 
#0674) measure would apply to all patients discharged from LTCHs. Data 
items in the revised LTCH CARE Data Set Version 3.00 would include: 
J1800, Any Falls Since Admission; and J1900, Number of Falls Since 
Admission.
    The calculation of the proposed application of the measure would be 
based on item J1900C, Number of Falls with Major Injury Since 
Admission. The measure specifications for the Percent of Residents 
Experiencing One or More Falls with Major Injury (Long Stay) (NQF 
#0674) measure are available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/index.html. We refer readers to section VIII.C.9.b. of the preamble of 
this proposed rule for more information on the data collection and 
submission timeline for this proposed quality measure.
    We are inviting public comment on our proposal to adopt an 
application of the Percent of Residents Experiencing One or More Falls 
with Major Injury (Long Stay) (NQF #0674) measure, with data collection 
beginning on April 1, 2016 for the FY 2018 payment determination and 
subsequent years to fulfill the requirements in the IMPACT Act of 2014.
d. Proposal To Address the IMPACT Act of 2014: Quality Measure 
Addressing the Domain of Functional Status, Cognitive Function, and 
Changes in Function and Cognitive Function: Application of Percent of 
LTCH Patients With an Admission and Discharge Functional Assessment and 
a Care Plan That Addresses Function (NQF #2631; Under NQF review)
    Section 1899B(c)(1) of the Act directs the Secretary to specify 
quality measures on which PAC providers are required under the 
applicable reporting provisions to submit standardized patient 
assessment data and other necessary data specified by the Secretary 
with respect to five quality domains, one of which is functional 
status, cognitive function, and changes in function and cognitive 
function. The specified application date by which the Secretary must 
specify quality measures to address this domain for IRFs and SNFs is 
October 1, 2016, for LTCHs is October 1, 2018, and for HHAs is January 
1, 2019. To satisfy these requirements, we are proposing to adopt an 
application of the Percent of LTCH Patients with an Admission and 
Discharge Functional Assessment and a Care Plan that Addresses Function 
(NQF

[[Page 24603]]

#2631; under NQF review) measure that we have already adopted in the 
LTCH QRP as a cross-setting quality measure that addresses the domain 
of functional status, cognitive function, and changes in function and 
cognitive function. The reporting of data for this measure would affect 
the payment determination for FY 2018 and subsequent years. This 
quality measure reports the percent of patients with both an admission 
and a discharge functional assessment and a goal that addresses 
function.
    The National Committee on Vital and Health Statistics, Subcommittee 
on Health,\207\ noted: ``[i]nformation on functional status is becoming 
increasingly essential for fostering healthy people and a healthy 
population. Achieving optimal health and well-being for Americans 
requires an understanding across the life span of the effects of 
people's health conditions on their ability to do basic activities and 
participate in life situations, in other words, their functional 
status.'' This statement is supported by research showing that patient 
functioning is associated with important patient outcomes such as 
discharge destination and length of stay in inpatient settings,\208\ as 
well as the risk of nursing home placement and hospitalization of older 
adults living in the community.\209\ Functioning is important to 
patients and their family members.210 211 212
---------------------------------------------------------------------------

    \207\ Subcommittee on Health National Committee on Vital 
Statistics, ``Classifying and Reporting Functional Status'' (2001).
    \208\ Reistetter TA, Graham JE, Granger CV, Deutsch A, 
Ottenbacher KJ.: Utility of Functional Status for Classifying 
Community Versus Institutional Discharges after Inpatient 
Rehabilitation for Stroke. Archives of Physical Medicine and 
Rehabilitation, 2010; 91:345-350.
    \209\ Miller EA, Weissert WG.: Predicting Elderly People's Risk 
for Nursing Home Placement, Hospitalization, Functional Impairment, 
and Mortality: A Synthesis. Medical Care Research and Review, 57; 3: 
259-297.
    \210\ Kurz, A. E., Saint-Louis, N., Burke, J. P., & Stineman, M. 
G.: Exploring the personal reality of disability and recovery: a 
tool for empowering the rehabilitation process. Qual Health Res, 
18(1), 90-105 (2008).
    \211\ Kramer, A. M. (1997). Rehabilitation care and outcomes 
from the patient's perspective. Med Care, 35(6 Suppl), JS48-57.
    \212\ Stineman, M. G., Rist, P. M., Kurichi, J. E., & Maislin, 
G.: Disability meanings according to patients and clinicians: 
imagined recovery choice pathways. Quality of Life Research, 18(3), 
389-398 (2009).
---------------------------------------------------------------------------

    The majority of patients who receive post-acute care services, such 
as care provided by SNFs, HHAs, IRFs and LTCHs, have functional 
limitations, and many of these patients are at risk for further decline 
in function due to limited mobility and ambulation.\213\ The patient 
and resident populations treated by SNFs, HHAs, IRFs and LTCHs vary in 
terms of their functional abilities at the time of the post-acute care 
admission and their goals of care. For IRF patients and many SNF 
residents, treatment goals may include fostering the patient's ability 
to manage his or her daily activities so that the patient can complete 
self-care and/or mobility activities as independently as possible, and, 
if feasible, return to a safe, active, and productive life in a 
community-based setting. For HHA patients, achieving independence 
within the home environment and promoting community mobility may be the 
goal of care. For other HHA patients, the goal of care may be to slow 
the rate of functional decline in order to allow the person to remain 
at home and avoid institutionalization.\214\
---------------------------------------------------------------------------

    \213\ Kortebein P, Ferrando A, Lombebeida J, Wolfe R, Evans WJ.: 
Effect of 10 days of bed rest on skeletal muscle in health adults. 
JAMA; 297(16):1772-4.
    \214\ Ellenbecker CH, Samia L, Cushman MJ, Alster K: Patient 
safety and quality in home health care. Patient Safety and Quality: 
An Evidence-Based Handbook for Nurses. Vol 1.
---------------------------------------------------------------------------

    Lastly, in addition to having complex medical care needs for an 
extended period of time, LTCH patients often have limitations in 
functioning because of the nature of their conditions, as well as 
deconditioning due to prolonged bed rest and treatment requirements 
(for example, ventilator use). The clinical practice guideline 
Assessment of Physical Function \215\ recommends that clinicians should 
document functional status at baseline and over time to validate 
capacity, decline, or progress. Therefore, assessment of functional 
status at admission and discharge and establishing a functional goal 
for discharge as part of the care plan (that is, treatment plan) is an 
important aspect of patient care in all of these post-acute care 
settings.
---------------------------------------------------------------------------

    \215\ Kresevic DM.: Assessment of physical function. In: Boltz 
M, Capezuti E, Fulmer T, Zwicker D, editor(s). Evidence-based 
geriatric nursing protocols for best practice. 4th ed. New York 
(NY): Springer Publishing Company; 2012. p. 89-103.
---------------------------------------------------------------------------

    Given the variation in patient and resident populations across the 
post-acute care settings, the functional activities that are typically 
assessed by clinicians for each type of post-acute care provider may 
vary. For example, the activity of rolling left and right in bed is an 
example of a functional activity that may be most relevant for low-
functioning patients or residents who are chronically critically ill. 
Managing a full flight of stairs may be assessed for higher functioning 
patients or residents. However, certain functional activities, such as 
eating, oral hygiene, lying down in to sitting on the side of the bed, 
toilet transfers, and walking or wheelchair mobility are important 
activities for patients in each post-acute care setting.
    Although functional assessment data are currently collected by 
SNFs, HHAs, IRFs and LTCHs, this data collection has employed different 
assessment instruments, scales, and item definitions. The data 
collected cover similar topics, but are not standardized across PAC 
settings. Further, the different sets of functional assessment items 
are coupled with different rating scales, making communication about 
patient functioning challenging when patients transition from one type 
of setting to another. Collection of standardized functional assessment 
data across SNFs, HHAs, IRFs and LTCHs, using common data items, would 
establish a common language for patient functioning, which may 
facilitate communication and care coordination as patients transition 
from one type of provider to another. The collection of standardized 
functional status data may also help improve patient or resident 
functioning during an episode of care by ensuring that basic daily 
activities are assessed at the start and end of each episode of care 
with the aim of determining whether at least one functional goal has 
been established.
    The functional assessment items included in the proposed functional 
status quality measure were originally developed and tested as part of 
the Post-Acute Care Payment Reform Demonstration (PAC-PRD) version of 
the Continuity Assessment Record and Evaluation (CARE) Item Set, which 
was designed to standardize the assessment of patients' status across 
acute care and post-acute care settings, including SNFs, HHAs, IRFs and 
LTCHs. The functional status items on the CARE Item Set are daily 
activities that clinicians typically assess at the time of admission 
and/or discharge in order to determine patients' or residents' needs, 
evaluate patient progress and prepare patients or residents and 
families for a transition to home or to another setting.
    The development of the CARE Item Set and a description and 
rationale for each item is described in a report entitled ``The 
Development and Testing of the Continuity Assessment Record and 
Evaluation (CARE) Item Set: Final Report on the Development of the CARE 
Item Set: Volume 1 of 3.'' \216\ Reliability and validity testing were 
conducted as part of CMS' Post-Acute Care Payment

[[Page 24604]]

Reform Demonstration, and we concluded that the functional status items 
have acceptable reliability and validity. A description of the testing 
methodology and results are available in several reports, including the 
report entitled ``The Development and Testing of the Continuity 
Assessment Record And Evaluation (CARE) Item Set: Final Report On 
Reliability Testing: Volume 2 of 3'' \217\ and the report entitled 
``The Development and Testing of The Continuity Assessment Record And 
Evaluation (CARE) Item Set: Final Report on Care Item Set and Current 
Assessment Comparisons: Volume 3 of 3.'' \218\ The reports are 
available on our Post-Acute Care Quality Initiatives Web page at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/CARE-Item-Set-and-B-CARE.html.
---------------------------------------------------------------------------

    \216\ Barbara Gage et al: ``The Development and Testing of the 
Continuity Assessment Record and Evaluation (CARE) Item Set: Final 
Report on the Development of the CARE Item Set'' (RTI, 
International, 2012).
    \217\ Ibid.
    \218\ Ibid.
---------------------------------------------------------------------------

    The cross-setting function quality measure we are proposing to 
adopt for the FY 2018 payment determination and subsequent years to 
meet the IMPACT Act of 2014 requirements is a process measure that is 
an application of the Percent of LTCH Patients with an Admission and 
Discharge Functional Assessment and a Care Plan That Addresses Function 
measure (NQF #2631; under NQF review). This quality measure was 
developed by the CMS. It reports the percent of patients with both an 
admission and a discharge functional assessment and a treatment goal 
that addresses function. The treatment goal provides documentation that 
a care plan with a goal has been established for the patient.
    We are proposing to use the data that will be collected and 
submitted using the LTCH CARE Data Set Version 3.00 for the Percent of 
LTCH Patients with an Admission and Discharge Functional Assessment and 
a Care Plan That Addresses Function measure (NQF #2631; under NQF 
review) measure starting April 1, 2016 in order to calculate this 
cross-setting application of the Percent of LTCH Patients with an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function measure (NQF #2631; under NQF review) quality 
measure. The items in the cross-setting application of the Percent of 
LTCH Patients with an Admission and Discharge Functional Assessment and 
a Care Plan That Addresses Function measure (NQF #2631; under NQF 
review) are a subset of the items included in the Percent of LTCH 
Patients with an Admission and Discharge Functional Assessment and a 
Care Plan That Addresses Function measure (NQF #2631; under NQF 
review), which was finalized in the FY 2015 IPPS/LTCH PPS final rule 
(79 FR 50291 through 50298). Therefore, the adoption of this quality 
measure to satisfy the requirements of the IMPACT Act of 2014 would not 
result in the addition of new items to the LTCH CARE Data Set Version 
3.00 and, therefore, would not result in additional burden for data 
collection and data submission to LTCHs.
    This process measure requires the collection of functional status 
admission and discharge assessment data using standardized clinical 
assessment items, or data elements, that assess specific functional 
activities, that is, self-care, mobility activities. The self-care and 
mobility function activities on the LTCH CARE Data Set Version 3.00 are 
coded using a 6-level rating scale that indicates the patient's level 
of independence with the activity; higher scores indicate more 
independence. For this quality measure, documentation of a goal for one 
of the function items reflects that the patient's care plan addresses 
function. The function goal is recorded at admission for at least one 
of the standardized self-care or mobility function items using the 6-
level rating scale.
    To the extent that a patient had an incomplete stay (for example, 
for the purpose of being admitted to an acute care facility), 
collection of discharge functional status data might not be feasible. 
Therefore, for patients with incomplete stays, admission functional 
status data and at least one treatment goal would be required; however, 
discharge functional status data would not be required to be reported.
    A TEP convened by our measure development contractor provided input 
on the technical specifications of this quality measure, as well as the 
feasibility of implementing the measure across post-acute care 
settings, including the LTCH setting. The TEP supported the 
implementation of this measure across post-acute care settings and also 
supported our efforts to standardize this measure for cross-setting 
use.
    In addition, the MAP met on February 9, 2015, and provided input to 
CMS on the measure. The MAP conditionally supported the use of an 
application of the Percent of LTCH Patients With an Admission and 
Discharge Functional Assessment and a Care Plan That Addresses Function 
measure (NQF #2631; under NQF review) for use in the LTCH QRP as the 
cross-setting measure. The conditions stated by the MAP included that 
the measure should be endorsed by the NQF. Finally, the MAP reiterated 
its support for adding measures addressing function, noting the group's 
special interest in this PAC/LTC core concept. More information about 
the MAP's recommendations for this measure is discussed in The MAP Off-
Cycle Deliberations 2015: Measures under Consideration to Implement 
Provisions of the IMPACT Act: Final Report which is available at: 
http://www.qualityforum.org/Setting_Priorities/Partnership/MAP_Final_Reports.aspx.
    The measure we are proposing is an application of the Percent of 
Long-Term Care Hospital Patients With an Admission and Discharge 
Functional Assessment and a Care Plan that Addresses Function (NQF 
#2631), which is under NQF review for consideration of endorsement. The 
proposed measure is derived from the Percent of Long-Term Care Hospital 
Patients With an Admission and Discharge Functional Assessment and a 
Care Plan that Addresses Function quality measure. The specifications 
are available for review at the LTCH QRP Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    We reviewed the NQF's consensus endorsed measures and were unable 
to identify any NQF-endorsed cross-setting quality measures focused on 
assessment of function for post-acute care patients. We are also 
unaware of any other cross-setting quality measures for functional 
assessment that have been endorsed or adopted by another consensus 
organization. Therefore, we are proposing to adopt this functional 
assessment measure for use in the LTCH QRP for the FY 2018 payment 
determination and subsequent years under the Secretary's authority to 
select non-NQF-endorsed measures.
    As discussed previously, we are proposing that this cross-setting 
quality measure use a subset of data collected for Percent of LTCH 
Patients with an Admission and Discharge Functional Assessment and a 
Care Plan That Addresses Function (NQF #2631; under NQF review) using 
the LTCH CARE Data Set, with submission through the QIES ASAP system. 
For more information on LTCH QRP reporting through the QIES ASAP 
system, we refer readers to the CMS Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html.
    The measure calculation algorithm is:

[[Page 24605]]

    Step 1. For each LTCH stay, the records of patients discharged 
during the 12-month target time period are identified and counted. This 
count is the denominator.
    Step 2. The records of patients with complete stays are identified, 
and the number of these patient stays with complete admission 
functional assessment data and at least one self-care or mobility 
activity goal and complete discharge functional assessment data is 
counted.
    Step 3. The records of patients with incomplete stays are 
identified, and the number of these patient records with complete 
admission functional status data and at least one self-care or mobility 
goal is counted.
    Step 4. The counts from Step 2 (complete LTCH stays) and Step 3 
(incomplete LTCH stays) are summed. The sum is the numerator count.
    Step 5. The numerator count is divided by the denominator count to 
calculate this quality measure.
    This measure is calculated at two points in time, at admission and 
discharge (we refer readers to section VIII.C.9.b. of the preamble of 
this proposed rule, Form, Manner and Timing of Quality data Submission, 
for more information on the proposed data collection and submission 
timeline for this proposed quality measure).
    The items would assess specific self-care and mobility activities, 
and would be based on functional items included in the Post-Acute Care 
Payment Reform Demonstration version of the CARE Item Set. The items 
have been developed and tested for reliability and validity in SNFs, 
HHAs, IRFs, and LTCHs. More information pertaining to item testing is 
available on our Post-Acute Care Quality Initiatives Web page at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Post-Acute-Care-Quality-Initiatives/CARE-Item-Set-and-B-CARE.html.
    We are inviting public comments on our proposal to adopt the 
application of the Percent of LTCH Patients with an Admission and 
Discharge Functional Assessment and a Care Plan That Addresses Function 
measure (NQF #2631; under NQF review) that we have already adopted in 
the LTCH QRP as a cross-setting quality measure that addresses the 
domain of functional status, cognitive function, and changes in 
function and cognitive function to satisfy the requirement of the 
IMPACT Act of 2014, with data collection starting on April 1, 2016 for 
the FY 2018 payment determination and subsequent years. Further, we are 
inviting public comments on our proposal to use a subset of data 
collected for the Percent of LTCH Patients with an Admission and 
Discharge Functional Assessment and a Care Plan That Addresses Function 
measure (NQF #2631; under NQF review) to meet the requirements for this 
cross-setting quality measure that addresses the domain of functional 
status, cognitive function, and changes in function and cognitive 
function to satisfy the requirement of the IMPACT Act of 2014.
    Lastly, in alignment with the requirements of the IMPACT Act of 
2014 to develop quality measures and standardize data for comparative 
purposes, we believe that evaluating outcomes across the post-acute 
settings using standardized data is an important priority. Therefore, 
in addition to proposing a process-based measure for the domain in the 
IMPACT Act of 2014 of ``Functional status, cognitive function, and 
changes in function and cognitive function,'' which is included in this 
year's proposed rule, we also intend to develop outcomes-based quality 
measures, including functional status and other quality outcome 
measures to further satisfy this domain. These measures will be 
proposed in future rulemaking in order to assess functional change for 
each care setting as well as across care settings.
7. LTCH QRP Quality Measures for the FY 2019 Payment Determination and 
Subsequent Years
    At this time, we are not proposing any additional LTCH QRP quality 
measures for the FY 2019 payment determination and subsequent years. 
Under our policy discussed in section VIII.C.3. of the preamble of this 
proposed rule, we will retain all previously adopted quality measures 
and, if finalized, the additional measures proposed in this rule for 
the FY 2019 payment determination and subsequent years.
8. LTCH QRP Quality Measures and Concepts Under Consideration for 
Future Years
    We are inviting public comments on importance, relevance, 
appropriateness, and applicability of each of the quality measures and 
quality measure concepts listed in the table below for future years in 
the LTCH QRP. Specifically, we are inviting public comments regarding 
the clinical importance to the LTCH patient population and the 
feasibility of data collection and implementation in the LTCH setting 
for these measures and measure concepts in order to inform and improve 
quality of care delivered to LTCH patients.

  Future Measures and Measure Concepts Under Consideration for the LTCH
                                   QRP
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
National Quality Strategy (NQS) Priority: Patient Safety:
    Ventilator Weaning (Liberation) Rate
    Compliance with ventilator process Elements during LTCH Stay
    Venous Thromboembolism Prophylaxis
    Medication Reconciliation.*
NQS Priority: Effective Communication and Coordination of Care:
    Transfer of health information and care preferences when an
     individual transitions.*
    All-Condition Risk-Adjusted Potentially Preventable Hospital
     Readmission Rate.*
NQS Priority: Patient- and Caregiver-Centered Care:
    Discharge to community.*
    Patient Experience of Care
    Percent of Patients with Moderate to Severe Pain
    Advance Care Plan
NQS Priority: Affordable Care:
    Medicare Spending per Beneficiary.*
------------------------------------------------------------------------
* Indicates that this is a cross-setting measure domain listed in the
  IMPACT Act of 2014.

9. Form, Manner, and Timing of Quality Data Submission for the FY 2016 
Payment Determination and Subsequent Years
a. Background
    Section 1886(m)(5)(C) of the Act requires that, for the FY 2014 
payment determination and subsequent years, each LTCH submit to the 
Secretary data on quality measures specified by the Secretary. In 
addition, section 1886(m)(5)(F) of the Act requires that, for the 
fiscal year beginning on the specified application date, as defined in 
section 1899B of the Act, and each subsequent year, each LTCH submit to 
the Secretary data on measures specified by the Secretary under section 
1899B of the Act. The data required under section 1886(m)(5)(C) and (F) 
of the Act must be submitted in a form and manner, and at a time, 
specified by the Secretary. As required by section 1886(m)(5)(A)(i) of 
the Act, for any LTCH that does not submit data in accordance with 
section 1886(m)(5)(C) of the Act with respect to a given rate year, any 
annual update to the standard Federal rate for discharges for the LTCH 
during the rate year must be reduced by 2 percentage points.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50857 through 50861 
and 50878 through 50881), we finalized the data submission timelines 
and submission deadlines for measures for the FY 2016 and FY 2017 
payment determinations. We refer readers to the FY 2014 IPPS/LTCH PPS 
final rule for a more detailed discussion of these

[[Page 24606]]

timelines and deadlines. Specifically, we refer readers to the table at 
78 FR 50878 of the FY 2014 IPPS/LTCH PPS final rule for the data 
collection period and submission deadlines for the FY 2016 payment 
determination and the tables at 78 FR 50881 of that final rule for the 
data collection timelines and submission deadlines for the FY 2017 
payment determination.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50307 through 
50311), we:
     Revised the previously adopted data collection period and 
submission deadlines for the Percent of Residents or Patients Who Were 
Assessed and Appropriately Given the Seasonal Influenza Vaccine (Short 
Stay) (NQF #0680) measure for the FY 2016 payment determination and 
subsequent years;
     Adopted data submission mechanisms for the FY 2018 payment 
determination and subsequent years for new LTCH QRP quality measures 
and for revisions to previously adopted quality measures;
     Adopted data collection periods and submission deadlines 
for certain measures under the LTCH QRP for the FY 2018 payment 
determination;
     Revised data collection timelines and submission deadlines 
for the application of the Percent of Residents Experiencing One or 
More Falls with Major Injury (Long Stay) (NQF #0674) measure for the FY 
2018 payment determination and subsequent years; and
     Adopted data collection timelines and submission deadlines 
under the LTCH QRP for the FY 2019 payment determination and subsequent 
years.
b. Proposed Timing for New LTCHs To Begin Reporting Data to CMS for the 
FY 2017 Payment Determination and Subsequent Years
    Beginning with the FY 2017 payment determination, we are proposing 
that a new LTCH be required to begin reporting quality data under the 
LTCH QRP by no later than the first day of the calendar quarter 
subsequent to 30 days after the date on its CMS Certification Number 
(CCN) notification letter. For example, if an LTCH's CCN notification 
letter is dated March 15, then the LTCH would be required to begin 
reporting quality data to CMS beginning on July 1 (March 15 + 30 days = 
April 14 (quarter 2)). The LTCH would be required to begin collecting 
quality data on the first day of the quarter subsequent to quarter 2, 
which is quarter 3, or July 1. The collection of quality data would 
begin on the first day of the calendar year quarter identified as the 
start date, and would include all LTCH admissions and subsequent 
discharges beginning on, and subsequent to, that day; however, 
submission of quality data would be required by previously finalized or 
newly proposed quarterly deadlines. In order to determine which quality 
measure data an LTCH would need to begin submitting, we refer readers 
to section VIII.C.9.c. of the preamble of this proposed rule, below, as 
it will vary depending upon the timing of the CY quarter identified as 
a start date. We also are proposing to codify this requirement for the 
timing of new LTCHs to begin reporting for purposes of the LTCH QRP at 
new proposed Sec.  412.560(a). We are inviting public comment on our 
proposals to add and codify this requirement for the timing of new 
LTCHs to begin reporting for purposes of the LTCH QRP.
c. Proposed Revisions to Previously Adopted Data Submission Timelines 
Under the LTCH QRP for the FY 2017 and FY 2018 Payment Determinations 
and Subsequent Years and Proposed Data Collection and Data Submission 
Timelines for Quality Measures Proposed in This Proposed Rule
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53636 through 
53637), we finalized new quarterly quality data submission deadlines 
for LTCHs. We contracted the deadlines from the original 4.5-month 
post-CY quarter submission deadlines, to 1.5 month (approximately 45 
days) deadlines. In order to align the data submission and correction 
deadlines with the IRF QRP and Hospital IQR Program as we near public 
reporting, and to meet the requirements of the IMPACT Act of 2014, we 
are proposing to revise the data submission and correction deadlines 
for quality measures previously adopted for the LTCH QRP for the FY 
2017 and FY 2018 payment determinations and subsequent years.
    We are proposing to adopt new deadlines that allow 4.5 months 
(approximately 135 days) after the end of each calendar year quarter 
for quality data submission, beginning with quarter 4 2015 (October 
2015 through December 2015). Under this new policy, LTCHs will have 
approximately 135 days following the end of each calendar year quarter, 
during which to submit, review, and correct their quality data for that 
CY quarter. We also are proposing data collection and data submission 
timelines for quality measures that we are proposing for the FY 2018 
payment determination and subsequent years. Further, for the measures 
proposed in this proposed rule--Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678), the 
application of Percent of Residents Experiencing One or More Falls with 
Major Injury (Long Stay) (NQF #0674), and the application of Percent of 
LTCH Patients with an Admission and Discharge Functional Assessment and 
a Care Plan That Addresses Function (NQF #2631)--we are proposing that 
the data collection and data submission timelines align with the 
proposed data collection and data submission timelines for each 
respective measure starting with April 1, 2016. Because the All-Cause 
Unplanned Readmission Measure for 30 Days Post Discharge from LTCHs 
(NQF #2512) is a Medicare FFS claims-based measure, the data collection 
and submission timelines are not applicable to this measure.
    The tables below present the data collection period and data 
submission timelines for quality measures affecting the FY 2017 payment 
determination, as well as the revisions to the data collection period 
and data submission timelines for quality measures for the FY 2018 
payment determination and subsequent years.

             Details on Data Collection Period and Data Submission Timeline for Quality Measures Affecting the FY 2017 Payment Determination
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Data collection         Proposed data        APU determination
          Quality measure                    NQF ID#            Submission method            period          submission deadlines         affected
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent of Residents or Patients     #0678.................  LTCH CARE Data Set/     1/1/15-3/31/15, 4/1/   5/15/15 (Q1), 8/15/15  FY 2017.
 with Pressure Ulcers That Are New                            QIES ASAP.              15-6/30/15, 7/1/15-9/  (Q2), 11/15/15 (Q3),
 or Worsened (Short Stay).                                                            30/15, 10/01/15-12/    Proposed 5/15/16
                                                                                      31/15.                 (Q4).
NHSN Catheter-Associated Urinary     #0138.................  CDC NHSN..............
 Tract Infection (CAUTI) Outcome
 Measure.
NHSN Central-Line Associated         #0139.................
 Bloodstream Infections (CLABSI)
 Outcome Measure.

[[Page 24607]]

 
NHSN Facility-wide Inpatient         #1716.................
 Hospital-onset Methicillin-
 resistant Staphylococcus aureus
 (MRSA) Bacteremia Outcome Measure.
NHSN Facility-wide Inpatient         #1717.................
 Hospital-onset Clostridium
 difficile Infection (CDI) Outcome
 Measure.
All-Cause Unplanned Readmission      #2512.................  Medicare FFS Claims     N/A..................  N/A..................  For future public
 Measure for 30 Days Post Discharge                           Data.                                                                 reporting.
 from Long Term Care Hospitals*.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This measure will not be used in determining compliance for the LTCH QRP because it is a claims-based measure and LTCHs do not report additional data
  to CMS.


        Details on Data Collection and Submission Timeline for Quality Measures Affecting the FY 2018 Payment Determination and Subsequent Years
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Data collection         Proposed data        APU determination
          Quality measure                    NQF ID#            Submission method            period          submission deadlines         affected
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent of Residents or Patients     #0678.................  LTCH CARE Data Set/     1/1/16-3/31/16, 4/1/   8/15/16 (Q1), 11/15/   FY 2018; Subsequent
 with Pressure Ulcers That Are New                            QIES ASAP.              16-6/30/16, 7/1/16-9/  16 (Q2), 2/15/17       Years.
 or Worsened (Short Stay).                                                            30/16, 10/01/16-12/    (Q3), 5/15/17 (Q4);
                                                                                      31/16; Quarterly for   Approximately 135
                                                                                      each subsequent        days after the end
                                                                                      calendar year.         of each quarter.
NHSN Catheter-Associated Urinary     #0138.................  CDC NHSN..............
 Tract Infection (CAUTI) Outcome
 Measure.
NHSN Central-Line Associated         #0139.................
 Bloodstream Infections (CLABSI)
 Outcome Measure.
NHSN Facility-wide Inpatient         #1716.................
 Hospital-onset Methicillin-
 resistant Staphylococcus aureus
 (MRSA) Bacteremia Outcome Measure.
NHSN Facility-wide Inpatient         #1717.................
 Hospital-onset Clostridium
 difficile Infection (CDI) Outcome
 Measure.
Percent of Residents or Patients     #0680.................  LTCH CARE Data Set/     10/1/15-12/31/15, 1/1/ 5/15/16, 8/15/16, 5/   FY 2018; Subsequent
 Who Were Assessed and                                        QIES ASAP.              16-3/31/16, 10/1-12/   15, 8/15 for           Years.
 Appropriately Given the Seasonal                                                     31, 1/1-3/31 for       subsequent years.
 Influenza Vaccine.                                                                   subsequent years.
Influenza Vaccination Coverage       #0431.................  CDC NHSN..............  10/1/15 (or when       8/15/16, 8/15 for      FY 2018; Subsequent
 among Healthcare Personnel.                                                          vaccine becomes        subsequent years.      Years.
                                                                                      available)-3/31/16,
                                                                                      10/1 (or when
                                                                                      vaccine becomes
                                                                                      available)-3/31.
All-Cause Unplanned Readmission      #2512.................  Medicare FFS Claims     N/A..................  N/A..................  For future public
 Measure for 30 Days Post Discharge                           Data.                                                                 reporting.
 from Long Term Care Hospitals.*
Application of Percent of Residents  #0674.................  LTCH CARE Data Set/     4/1/16-6/30/16, 7/1/   11/15/16 (Q2), 2/15/   FY 2018; Subsequent
 Experiencing One or More Falls                               QIES ASAP.              16-9/30/16, 10/1/16-   17 (Q3), 5/15/17       Years.
 with Major Injury (Long Stay).                                                       12/31/16; Quarterly    (Q4).
                                                                                      for each subsequent
                                                                                      calendar year.
Percent of Long-Term Care Hospital   #2631 (Under NQF
 Patients with an Admission and       review).
 Discharge Functional Assessment
 and a Care Plan That Addresses
 Function.
Change in Mobility Among Long-Term   #2632 (Under NQF        ......................  .....................  Quarterly              .....................
 Care Hospital Patients Requiring     review).                                                               approximately 135
 Ventilator Support.                                                                                         days after the end
                                                                                                             of each quarter for
                                                                                                             subsequent years.
Ventilator Associated Event........  N/A...................  CDC NHSN..............  1/1/16-3/31/16, 4/1/   8/15/16 (Q1), 11/15/   FY 2018; Subsequent
                                                                                      16-6/30/16, 7/1/16-9/  16 (Q2), 2/15/17       Years.
                                                                                      30/16, 10/1/16-12/31/  (Q3), 5/15/17 (Q4);
                                                                                      16; Quarterly for      Quarterly
                                                                                      each subsequent        approximately 135
                                                                                      calendar year.         days after the end
                                                                                                             of each quarter for
                                                                                                             each subsequent year.

[[Page 24608]]

 
Application of Percent of Long-Term  #2631 (Under NQF        LTCH CARE Data Set/     4/1/16-6/30/16, 7/1/   11/15/16 (Q2), 2/15/   FY 2018; Subsequent
 Care Hospital Patients with an       review).                QIES ASAP.              16-9/30/16, 10/1/16-   17 (Q3), 5/15/17       Years.
 Admission and Discharge Functional                                                   12/31/16; Quarterly    (Q4); Quarterly
 Assessment and a Care Plan That                                                      for each subsequent    approximately 135
 Addresses Function.                                                                  calendar year.         days after the end
                                                                                                             of each quarter for
                                                                                                             subsequent years.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* This measure will not be used in determining compliance for the LTCH QRP because it is a claims-based measure and LTCHs do not report additional data
  to CMS.

    We are inviting public comments on our proposals.
10. Previously Adopted LTCH QRP Data Completion Thresholds for the FY 
2016 Payment Determination and Subsequent Years
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50311 through 
50314), we finalized specific LTCH QRP thresholds for completeness of 
LTCH data submissions. To ensure that LTCHs are meeting an acceptable 
standard for completeness of submitted data, we finalized the policy 
that, beginning with the FY 2016 payment determination and for each 
subsequent year, LTCHs must meet or exceed two separate data 
completeness thresholds: One threshold set at 80 percent for completion 
of quality measures data collected using the LTCH CARE Data Set and 
submitted through the QIES; and a second threshold set at 100 percent 
for quality measures data collected and submitted using the CDC NHSN.
    In addition, we stated that we would apply the same thresholds to 
all measures adopted as the LTCH QRP expands and LTCHs report data on 
the finalized measure sets. That is, as we finalize new measures 
through the regulatory process, LTCHs will be held accountable for 
meeting the previously finalized data completion threshold requirements 
for each measure until such time that updated threshold requirements 
are proposed and finalized through a subsequent regulatory cycle.
    Further, we finalized the requirement that a LTCH must meet or 
exceed both thresholds in order to avoid receiving a 2-percentage point 
reduction to their annual payment update for a given fiscal year, 
beginning with FY 2016 and for all subsequent payment updates. We are 
not proposing any changes to these policies. We refer readers to the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50311 through 50314) for a 
detailed discussion of the finalized data completion requirements of 
the LTCH QRP.
11. Future LTCH QRP Data Validation Process
    Historically, we have built consistency and internal validation 
checks into our data submission specifications to ensure that the data 
elements of the LTCH CARE Data Set assessments conform to requirements 
such as proper format and facility information. These internal 
consistency checks are automated and occur during the LTCH data entry 
and submission process, and help ensure the integrity of the data 
submitted by LTCHs by rejecting submissions or issuing warnings when 
LTCH data contain logical inconsistencies. These internal consistency 
checks are referred to as ``system edits'' and are further outlined in 
the LTCH Data Submission Specifications version 1.01, which are 
available for download on the LTCH Quality Reporting Technical 
Information Web page at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCHTechnicalInformation.html.
    Validation is intended to provide added assurance of the accuracy 
of the data that will be reported to the public as required by sections 
1886(m)(5)(E) and 1899B(g) of the Act. In the FY 2015 IPPS/LTCH PPS 
proposed rule (79 FR 28275 through 28276), we proposed, for the FY 2016 
payment determination and subsequent years, to validate the data 
elements submitted to CMS for quality purposes. We also proposed 
policies regarding the application of the 2-percentage point reduction 
for LTCHs that failed to meet the data accuracy threshold.
    However, in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50314 
through 50316), we decided to further explore suggestions from 
commenters before finalizing the LTCH data validation process that we 
proposed. Therefore, we did not finalize the data validation proposals.
    At this time, we are continuing to explore data accuracy validation 
methods and threshold policies that will limit the amount of burden and 
cost to LTCHs, while allowing us to establish estimations of the 
accuracy of LTCH QRP data. Therefore, in this proposed rule, we are not 
proposing any new policies related to data accuracy validation, but we 
plan to do so in future rulemaking cycles.
12. Proposed Public Display of Quality Measure Data for the LTCH QRP
    Section 1886(m)(5)(E) of the Act requires the Secretary to 
establish procedures for making the LTCH QRP data available to the 
public. In so doing, the Secretary must ensure that LTCHs have the 
opportunity to review any such data with respect to the LTCH prior to 
its release to the public. Section 1899B(g) of the Act requires the 
Secretary to establish procedures for making available to the public 
information regarding the performance of individual PAC providers with 
respect to the measures required under section 1899B of the Act 
beginning not later than 2 years after the applicable specified 
application date. The procedures must ensure, including through a 
process consistent with the process applied under section 
1886(b)(3)(B)(viii)(VII) of the Act for similar purposes, that each PAC 
provider has the opportunity to review and submit corrections to the 
data and information that are to be made public with respect to the PAC 
provider prior to such data being made public. We are proposing to 
display performance data related to the LTCH QRP quality measures, as 
applicable, required by the LTCH QRP by fall 2016 on a CMS Web site, 
such as the Hospital Compare Web site (http://www.hospitalcompare.hhs.gov), after a 30-day preview period. Additional 
information about preview report content and delivery will be announced 
on the LTCH QRP Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/index.html. LTCHs would be notified

[[Page 24609]]

via CMS listservs, CMS mass emails and memorandums, LTCH QRP Web site 
announcements and Medicare Learning Network announcements regarding the 
release of preview reports, as well as the timing of the posting of 
provider data.
    The Hospital Compare Web site is an interactive Web tool that 
assists beneficiaries by providing information on hospital quality of 
care to those who need to select a hospital. It further serves to 
encourage beneficiaries to work with their hospital to discuss the 
quality of care provided to patients, thereby providing an additional 
incentive to hospitals to improve the quality of care that they 
furnish. As we have done on some of the other CMS Compare Web sites, we 
will, at some point in the future, report public data using a quality 
rating system that gives each LTCH a rating of between one and five 
stars. Initially, however, we will not use the 5-star methodology, 
until such time that we are publicly reporting a sufficient number of 
quality metrics to allow for variation and the differentiation among 
LTCHs using this methodology. Decisions regarding how the rating system 
will determine an LTCH's star rating and methods used for calculations, 
as well as a proposed timeline for implementation will be announced via 
regular LTCH communication channels, including listening sessions, 
memos, email notification, provider association calls, open door 
forums, and Web postings.
    The initial display of information would contain performance data 
on four quality measures: (1) NHSN CAUTI Outcome Measure (NQF #0138); 
(2) NHSN CLABSI Outcome Measure (NQF #0139); (3) Percent of Residents 
or Patients with Pressure Ulcers that are New or Worsened (Short-Stay) 
(NQF #0678); and (4) All-Cause Unplanned Readmission Measure for 30 
Days Post-Discharge from LTCHs (NQF #2512). We are proposing to 
publicly report data beginning with data collected on these measures 
for the first quarter of 2015, or discharges beginning January 1, 2015, 
with exception of the All-Cause Unplanned Readmission Measure for 30 
Days Post-Discharge from LTCHs (NQF #2512). Rates would be displayed 
based on four (4) rolling quarters of data and would use discharges 
from January 1, 2015 through December 31, 2015 (CY 2015), for 
calculation, with exception of the measure All-Cause Unplanned 
Readmission Measure for 30 Days Post-Discharge from LTCHs (NQF #2512). 
With respect to LTCH performance related to the All-Cause Unplanned 
Readmission Measure for 30 Days Post-Discharge from LTCHs (NQF #2512), 
we are proposing to publicly report readmission rates beginning with 
Medicare FFS claims data for patient discharges starting with January 
1, 2013. Readmission rates will be calculated using Medicare FFS claims 
data for two consecutive years (for example, readmission rates will be 
calculated using Medicare FFS claims data for January 1, 2013 through 
December 31, 2014 (CY 2013 and CY 2014)) and displayed on a calendar 
year basis.
    Calculations for the CAUTI and CLABSI measures adjust for 
differences in the characteristics of hospitals and patients using a 
Standardized Infection Ratio (SIR). The SIR is a summary measure that 
takes into account differences in the types of patients that a hospital 
treats. The SIR may take into account the type of patient care 
location, laboratory methods, hospital affiliation with a medical 
school, bed size of the hospital, patient age, and American Society of 
Anesthesiologists' classification of physical health. It compares the 
actual number of HAIs in a facility or State to a national benchmark 
based on previous years of reported data and adjusts the data based on 
several factors. A confidence interval with a lower and upper limit is 
displayed around each SIR to indicate that there is a high degree of 
confidence that the true value of the SIR lies within that interval. An 
SIR with a lower limit that is greater than 1.0 means that there were 
more HAIs in a facility or State than were predicted, and the facility 
is classified as ``Worse than the U.S. National Benchmark.'' If the SIR 
has an upper limit that is less than 1, the facility had fewer HAIs 
than were predicted and is classified as ``Better than the U.S. 
National Benchmark.'' If the confidence interval includes the value of 
1, there is no statistical difference between the actual number of HAIs 
and the number predicted, and the facility is classified as ``No 
Different than U.S. National Benchmark.'' If the number of predicted 
infections is less than 1, the SIR and confidence interval cannot be 
calculated.
    Calculations for the Percent of Residents or Patients with Pressure 
Ulcers That Are New or Worsened measure application (NQF #0678) would 
be risk-adjusted. Resident- or patient-level covariate risk adjustment 
is performed. Resident- or patient-level covariates are used in a 
logistic regression model to calculate a resident- or patient-level 
expected quality measure (QM) score (the probability that the resident 
or patient will evidence the outcome, given the presence or absence of 
patient characteristics measured by the covariates). Then, an average 
of all resident- or patient-level expected QM scores for the facility 
is calculated to create a facility-level expected QM score. The final 
facility-level adjusted QM score is based on a calculation which 
combines the facility-level expected score and the facility level 
observed score. Additional information about the covariates can be 
found at: http://www.qualityforum.org/QPS/0678.
    Finally, calculation for performance on the measure All-Cause 
Unplanned Readmission Measure for 30 Days Post Discharge from IRFs (NQF 
#2502) will also be risk-adjusted. The risk adjustment methodology is 
available, along with the specifications for this measure, on our LTCH 
Quality Reporting Measures Information Web page at http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html.
    We are currently developing reports that will allow providers to 
view the data that is submitted to CMS via the QIES ASAP system and the 
CDC's NHSN (Percent of Residents or Patients with Pressure Ulcers That 
Are New or Worsened (Short Stay) (NQF #0678), the NHSN CAUTI Outcome 
Measure (NQF #0138) and the NHSN CLABSI Outcome Measure (NQF #0139), 
respectively). These reports, although not initially, will also include 
provider performance on any currently reported quality measure that is 
calculated based on CMS claims data that we plan on publicly reporting 
(All-Cause Unplanned Readmission Measure for 30 Days Post-Discharge 
from LTCHs (NQF #2512)). Although real time results will not be 
available, the report will refresh all of the data submitted at least 
once a month.
    We are proposing a process to give providers an opportunity to 
review and correct data submitted to the QIES ASAP system or to the 
CDC's NHSN system by utilizing that report. Under this proposed 
process, providers would to have the opportunity to review and correct 
data they submit on all assessment-based measures. Providers can begin 
submitting data on the first admission of any reporting quarter. 
Providers are encouraged to submit data early in the submission 
schedule so that they can identify errors and resubmit data before the 
quarterly submission deadline. The data would be populated into reports 
that are updated at least once a month with all data that have been 
submitted. That report would contain the provider's performance on each 
measure calculated based on assessment submissions to the QIES ASAP or 
CDC NHSN system. We believe that the submission deadline timeframe,

[[Page 24610]]

which we have proposed in this proposed rule to extend from the current 
1.5 month policy to 4.5 months beyond the end of each calendar year 
quarter, is sufficient time for providers to be able to submit, review 
data, make corrections to the data, and view their data. We are 
proposing that once the provider has an opportunity to review and 
correct quarterly data related to measures submitted via the QIES ASAP 
or CDC NHSN system, we would consider the provider to have been given 
the opportunity to review and correct this data. We would not allow 
patient-level data correction after the submission deadline or for 
previous years. This is because we must set a deadline to ensure timely 
computation of measure rates and payment adjustment factors. Before we 
display this information, providers will be permitted 30 days to review 
their information as recorded in the QIES ASAP or CDC NHSN system.
    We are inviting public comment on this proposal.
    In addition to our proposal to publicly display LTCH performance 
data on the required quality measures under the LTCH QRP, we are also 
are proposing to publish a list of LTCHs that successfully meet the 
reporting requirements for the applicable payment determination on the 
LTCH QRP Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/. We are 
proposing updating the list after reconsideration requests are 
processed on an annual basis. We are proposing to codify the policy to 
publish a list of compliant LTCHs on the LTCH QRP Web site at new 
proposed Sec.  412.560(d)(3).
    We are inviting comment on our proposal to begin publicly reporting 
LTCH QRP data on quality measures required by the LTCH QRP, beginning 
in fall 2016.
13. Previously Adopted and Proposed LTCH QRP Reconsideration and 
Appeals Procedures for the FY 2017 Payment Determination and Subsequent 
Years
    At the conclusion of each fiscal year reporting cycle, we review 
the data received from each LTCH to determine if the LTCH met the 
reporting requirements set forth for that reporting cycle. LTCHs that 
are found to be noncompliant will receive a reduction in the amount of 
2 percentage points to their annual payment update for the applicable 
fiscal year. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50317 
through 50318), we described and adopted an updated process that 
enables an LTCH to request a reconsideration of our initial 
noncompliance decision in the event that an LTCH believes that it was 
incorrectly identified as being subject to the 2-percentage point 
reduction to its annual payment due to noncompliance with the LTCH QRP 
reporting requirements for a given reporting period.
    We wish to clarify that any LTCH that wishes to submit a 
reconsideration request must do so by submitting an email to CMS 
containing all of the requirements listed on the LTCH QRP Web site at: 
http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Reconsideration-and-Exception-and-Extension.html. Email sent to 
[email protected] is the only form of submission that 
will be accepted from an LTCH provider requesting reconsideration. Any 
reconsideration requests received through another channel, including 
the U.S. Postal Service (USPS) or telephone, will not be considered as 
a valid reconsideration request.
    We are proposing to continue using the LTCH QRP reconsideration and 
appeals procedures that were adopted in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50317 through 50318) and that have been posted on the LTCH 
QRP Web site for the FY 2017 payment determination and subsequent 
years, with an exception regarding the way in which noncompliant LTCHs 
are notified of this determination.
    Previously, only LTCHs found to be noncompliant with the reporting 
requirements set forth for a given payment determination received a 
notification of this finding along with instructions for requesting 
reconsideration in the form of a certified letter via the USPS. In an 
effort to communicate as quickly, efficiently, and broadly as possible 
with LTCHs regarding annual compliance, we are proposing changes to our 
communications method regarding annual notification of reporting 
compliance in the LTCH QRP. In addition to sending a letter via regular 
USPS mail, beginning with the FY 2016 payment determination and for 
subsequent fiscal years, we are proposing the QIES as a mechanism to 
communicate to LTCHs regarding their compliance with the reporting 
requirements for the given reporting cycle.
    We note that all LTCHs have been required to use the QIES system in 
order to report on required LTCH QRP measures since October 1, 2012. 
Therefore, we are proposing that all Medicare-certified LTCH compliance 
letters be uploaded into the QIES for each LTCH to access. Instructions 
to download files from QIES may be found on the Web site at: https://www.qtso.com/LTCH.html. We are proposing to disseminate communications 
regarding the availability of compliance reports in LTCHs' QIES files 
through routine channels to LTCHs and vendors, including, but not 
limited to, issuing memos, emails, Medicare Learning Network 
announcements, and notices on the LTCH QRP Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/.
    The purpose of the compliance letter is to notify an LTCH that it 
has been identified as either being compliant or noncompliant with the 
LTCH QRP reporting requirements for the given reporting cycle. If the 
LTCH is determined to be noncompliant, the notification would indicate 
that the LTCH is scheduled to receive a 2 percentage point reduction to 
its upcoming annual payment update and that it may file a 
reconsideration request if it disagrees with this finding. LTCHs may 
request a reconsideration of a noncompliance determination through the 
CMS reconsideration request process.
    We also are proposing that the notifications of our decision 
regarding received reconsideration requests will be made available 
through the QIES. We are not proposing to change the process or 
requirements for requesting reconsideration, and we refer readers to 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50317 through 50318) for a 
discussion of the LTCH QRP reconsideration and appeals procedures.
    We also are proposing to publish a list of LTCHs that successfully 
meet the reporting requirements for the applicable payment 
determination on the LTCH QRP Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/. We are proposing updating the list after reconsideration 
requests are processed on an annual basis.
    We are proposing to codify the LTCH QRP reconsideration and appeal 
procedures at new proposed Sec.  412.560(d) and (e).
    We are inviting public comment on the proposals to change the 
communication mechanism to the QIES for the dissemination of compliance 
notifications and reconsideration decisions, to publish a list of 
compliant LTCHs on the LTCH QRP Web site, and

[[Page 24611]]

to codify these processes at new proposed Sec.  412.560(d)(1) and 
(d)(3).
    14. Previously Adopted and Proposed LTCH QRP Submission Exception 
and Extension Requirements for the FY 2017 Payment Determination and 
Subsequent Years
    We refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50883 through 50885) and the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50316 through 50317) for a detailed discussion of the LTCH QRP 
Submission Exception and Extension requirements. For the FY 2017 
payment determination and subsequent years, we are not proposing any 
changes to the LTCH QRP requirements that we adopted in these final 
rules. However, we are proposing to codify the LTCH QRP Submission 
Exception and Extension Requirements at new Sec.  412.560(c) and (d).
    We remind readers that, in the FY 2015 IPPS/LTCH PPS final rule (79 
FR 50316 through 50317), we stated that LTCHs must submit request an 
exception or extension by submitting a written request along with all 
supporting documentation to CMS via email to the LTCH mailbox at 
[email protected]. We further stated that exception 
or extension requests sent to CMS through any other channel would not 
be considered as a valid request for an exception or extension from the 
LTCH QRP's reporting requirements for any payment determination. In 
order to be considered, a request for an exception or extension must 
contain all of the requirements as outlined on our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Reconsideration-and-Disaster-Waiver-Requests.html.
    We are inviting public comments on our proposal to codify the LTCH 
QRP submission exception and extension requirements.

D. Clinical Quality Measurement for Eligible Hospitals and Critical 
Access Hospitals Participating in the EHR Incentive Programs in 2016

1. Background
    The HITECH Act (Title IV of Division B of the ARRA, together with 
Title XIII of Division A of the ARRA) authorizes incentive payments 
under Medicare and Medicaid for the adoption and meaningful use of 
certified electronic health record (EHR) technology (CEHRT). Eligible 
hospitals and CAHs may qualify for these incentive payments under 
Medicare (as authorized under sections 1886(n) and 1814(l) of the Act, 
respectively) if they successfully demonstrate meaningful use of CEHRT, 
which includes reporting on clinical quality measures (CQMs) using 
CEHRT.
    Sections 1886(b)(3)(B) and 1814(l) of the Act also establish 
downward payment adjustments under Medicare, beginning with FY 2015, 
for eligible hospitals and CAHs that are not meaningful users of CEHRT 
for certain associated reporting periods. Section 1903(a)(3)(F)(i) of 
the Act establishes 100 percent Federal financial participation (FFP) 
to States for providing incentive payments to eligible Medicaid 
providers (described in section 1903(t)(2) of the Act) to adopt, 
implement, upgrade and meaningfully use CEHRT.
    Under sections 1886(n)(3)(A) and 1814(l)(3)(A) of the Act and the 
definition of ``meaningful EHR user'' under 42 CFR 495.4, eligible 
hospitals and CAHs must report on CQMs selected by CMS using CEHRT, as 
part of being a meaningful EHR user under the Medicare EHR Incentive 
Program. The set of CQMs from which eligible hospitals and CAHs will 
report under the EHR Incentive Program beginning in FY 2014 is listed 
in Table 10 of the EHR Incentive Program Stage 2 final rule (77 FR 
54083).
    Section 1886(n)(3)(B)(iii) of the Act requires that, in selecting 
measures for eligible hospitals and CAHs for the Medicare EHR Incentive 
Program, and establishing the form and manner for reporting measures, 
the Secretary shall seek to avoid redundant or duplicative reporting 
with reporting otherwise required, including reporting under section 
1886(b)(3)(B)(viii) of the Act, the Hospital IQR Program.
    In the EHR Incentive Program Stage 3 proposed rule \219\ (80 FR 
16769), to further our alignment goal among CMS quality reporting 
programs for eligible hospitals and CAHs and avoid redundant or 
duplicative reporting among hospital programs, we stated our intent to 
address CQM reporting requirements for the Medicare and Medicaid EHR 
Incentive Program for eligible hospitals and CAHs for 2016, 2017, and 
future years in the IPPS rulemaking. We further stated our belief that 
receiving and reviewing public comments for various CMS quality 
programs at one time and finalizing the requirements for these programs 
simultaneously would allow us to better align these programs for 
eligible hospitals and CAHs, allow more flexibility into the Medicare 
and Medicaid EHR Incentive Programs, and add overall value and 
consistency by providing us the opportunity to address public comments 
that affect multiple programs at one time.
---------------------------------------------------------------------------

    \219\ Medicare and Medicaid Programs: Electronic Health Record 
Incentive Program--Stage 3; proposed rule (80 FR 16731 through 
16804) (``EHR Incentive Program Stage 3 proposed rule'').
---------------------------------------------------------------------------

    ONC, in its 2015 Edition proposed rule (80 FR 16844), also 
indicated that it intends to propose certification policy for the 
reporting of CQMs for eligible hospitals and CAHs in or with annual 
IPPS rulemaking to better align with the reporting goals of other CMS 
programs.
2. CQM Reporting for the Medicare and Medicaid EHR Incentive Programs 
in 2016
a. Background
    In the EHR Incentive Program Stage 2 final rule, we outlined the 
CQMs available for use in the EHR Incentive Programs beginning in 2014 
for eligible hospitals and CAHs in Table 10 at 77 FR 54083 through 
54087, as well as the form and method for submission at 77 FR 54087 
through 54089. In this proposed rule, for CQM reporting for the EHR 
Incentive Programs in 2016, we are proposing to maintain the existing 
requirements established in earlier rulemaking for the reporting of 
CQMs, unless indicated otherwise in this proposed rule. These 
requirements include reporting on 16 CQMs covering at least 3 NQS 
domains for eligible hospitals and CAHs (77 FR 54079).
    As we expand the current measures to align with the National 
Quality Strategy and the CMS Quality Strategy \220\ and incorporate 
updated standards and terminologies in current CQMs, including updating 
the electronic specifications for these CQMs, and creating de novo 
CQMs, we plan to expand the set of CQMs available for reporting under 
the EHR Incentive Programs in CY 2017 and subsequent years. We will 
continue to engage stakeholders to provide input on future proposals 
for CQMs as well as requesting comment on future electronic 
specifications for new and updated CQMs.
---------------------------------------------------------------------------

    \220\ Available at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/CMS-Quality-Strategy.html.
---------------------------------------------------------------------------

b. Proposed CQM Reporting Period for the Medicare and Medicaid EHR 
Incentive Programs in CY 2016
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50319 through 
50321), we began to shift CQM reporting to a calendar year basis for 
eligible hospitals and CAHs for the Medicare EHR Incentive Program. We 
established that

[[Page 24612]]

for eligible hospitals and CAHs that submit CQMs electronically in 
2015, the reporting period is one calendar quarter from Q1, Q2, or Q3 
of CY 2015 (79 FR 50321).
    In the EHR Incentive Program Stage 3 proposed rule, beginning in 
2015, we proposed to change the definition of ``EHR reporting period'' 
in Sec.  495.4 for EPs, eligible hospitals, and CAHs such that the EHR 
reporting period would begin and end in relation to a calendar year. In 
connection with that proposal, we are proposing that the reporting 
period for CQMs in 2016 for eligible hospitals and CAHs for the 
Medicare and Medicaid EHR Incentive Programs would also be based on the 
calendar year. We believe it is important to continue our goal of 
aligning the EHR Incentive Program with the Hospital IQR Program 
because alignment of these programs will serve to reduce hospital 
reporting burden and encourage the adoption and meaningful use of CEHRT 
by eligible hospitals and CAHs.
    For 2016 (FY 2018 payment determination), the Hospital IQR Program 
is proposing to require quarterly reporting and submission periods for 
eCQMs for the 3rd and 4th CY quarters. We refer readers to section 
VIII.A.8.b. of the preamble of this proposed rule for further 
discussion of the proposals for the Hospital IQR Program. We believe it 
is important for us to maintain our goal of alignment between the 
Hospital IQR and EHR Incentive Programs. Therefore, we are proposing to 
align the reporting period in CY 2016 for eligible hospitals and CAHs 
that report CQMs electronically for the Medicare EHR Incentive Program 
with that of the Hospital IQR Program and require quarterly reporting 
and submission periods for eCQMs in the 3rd and 4th CY quarters.
    In addition, in this proposed rule, the Hospital IQR Program is 
proposing to change its submission period for eCQMs from annual to 
quarterly submission, and proposing to change the submission deadline 
from November 30, 2015 to ending 2 calendar months after the close of 
the reporting CY quarter (for CY 2016/FY 2018 payment determination, 
the proposed deadlines are November 30, 2016 for Q3 and February 28, 
2017 for Q4). We refer readers to the Hospital IQR Program discussion 
in section VIII.A.10.d.(3) of the preamble of this proposed rule for 
more information about these proposals. Therefore, to coincide with the 
submission period in the Hospital IQR Program, we also are proposing to 
align the Medicare EHR Incentive Program submission period for CY 2016 
with the submission period proposed for the Hospital IQR Program.
    We are proposing the following CQM reporting periods and submission 
deadlines for eligible hospitals and CAHs participating in the Medicare 
EHR Incentive Program in CY 2016:
     Eligible hospitals and CAHs Reporting CQMs by Attestation
    ++ For eligible hospitals and CAHs demonstrating meaningful use for 
the first time in 2016, any continuous 90-day reporting period within 
CY 2016; or one full calendar year reporting period for CY 2016. 
Attestation by February 28, 2017.
    ++ For eligible hospitals and CAHs that demonstrated meaningful use 
in any year prior to 2016, one full calendar year reporting period for 
CY 2016. Attestation by February 28, 2017.
     Eligible hospitals and CAHs Reporting CQMs 
Electronically--Two full quarters of data (Q3 and Q4 of CY 2016) 
submitted via electronic reporting within 2 months after the close of 
each quarter (Q3 by November 30, 2016; Q4 by February 28, 2017).
    We also are proposing that the CQM reporting period for eligible 
hospitals and CAHs participating in the Medicaid EHR Incentive Program 
would be any continuous 90-day reporting period within CY 2016 for 
eligible hospitals and CAHs demonstrating meaningful use for the first 
time; and one full calendar year reporting period of CY 2016 for 
eligible hospitals and CAHs that demonstrated meaningful use in any 
year prior to 2016. Providers should refer to their State Medicaid 
program for requirements on submission methods and deadlines.
    We note that, beginning in CY 2017 and in subsequent years, we 
proposed in the Stage 3 proposed rule (80 FR 16739 through 16740) to 
require a reporting period of one full calendar year for CQM reporting 
for all providers participating in the EHR Incentive Programs, with a 
limited exception for Medicaid providers demonstrating meaningful use 
for the first time.
    We are inviting public comment on these proposals.
c. CQM Reporting Form and Method for the Medicare EHR Incentive Program 
in 2016
    In the EHR Incentive Program Stage 2 final rule (77 FR 54087 
through 54089), we finalized the reporting methods for eligible 
hospitals and CAHs for the Medicare EHR Incentive Program, which 
included reporting electronically or by attestation. We finalized that 
eligible hospitals and CAHs that are beyond their first year of 
meaningful use will be required to electronically submit the selected 
16 CQMs. Subsequent to the Stage 2 final rule, we determined that 
electronic submission of aggregate-level data using QRDA-III would not 
be feasible in 2014 and 2015, and thus, eligible hospitals and CAHs 
would have the option to continue to report aggregate CQM results 
through attestation for the reporting periods in 2014 and 2015 (78 FR 
50904 through 50905; 79 FR 50321 through 50322).
    We are proposing to continue our existing policy that eligible 
hospitals and CAHs in any year of participation in the Medicare EHR 
Incentive Program in 2016 may report CQMs by attestation or 
electronically using the options previously outlined for electronic 
reporting either for single program participation in the Medicare EHR 
Incentive Program, or for participation in multiple programs if the 
requirements of the aligned quality program are met. The options for 
CQM submission for eligible hospitals and CAHs in the Medicare EHR 
Incentive Program are as follows:
     Eligible hospital and CAH options for Medicare EHR 
Incentive Program participation (single program participation)
    ++ Option 1: Attest to CQMs through the EHR Registration & 
Attestation System.
    ++ Option 2: Electronically report CQMs through QualityNet Portal.
     Eligible hospital and CAH options for electronic reporting 
for multiple programs (for example: EHR Incentive Program plus Hospital 
IQR Program participation--Electronically report through QualityNet 
Portal.
    For the Medicaid EHR Incentive Program, States will continue to be 
responsible for determining whether and how electronic reporting of 
CQMs would occur, or if they wish to allow reporting through 
attestation. Any changes that States make to their CQM reporting 
methods must be submitted through the State Medicaid Health IT Plan 
(SMHP) process for CMS review and approval prior to being implemented.
    We are proposing to continue our policy that electronic submission 
of CQMs would require the use of the most recent release of the CQM 
version for each CQM to which the EHR is certified. For electronic 
reporting in 2016, this means eligible hospitals and CAHs would be 
required to use the Spring 2015 release of the CQMs available at the 
CMS eCQM Library (http://cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/eCQM_Library.html). We note that an EHR certified 
for CQMs under the 2014 Edition certification criteria does not need to 
be recertified each time it is updated to a more recent version of the

[[Page 24613]]

CQMs. (For further information on CQM reporting, we direct readers to 
the EHR Incentive Program Web site where guides and tip sheets are 
available for each reporting option (www.CMS.gov/ehrincentiveprograms).) However, we encourage EHR developers to test 
any updates, including any changes to the CQMs and changes to the CMS 
reporting requirements based on the CMS QRDA implementation guide, on 
an annual basis.
    The form and method of electronic submission is further explained 
in subregulatory guidance and the certification process. For example, 
the following documents are updated annually to reflect the most recent 
CQM electronic specifications: the CMS QRDA Implementation Guide; 
program specific performance calculation guidance; and CQM electronic 
specifications and guidance documents. These documents are located on 
the CMS eCQM Library (http://cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/eCQM_Library.html).
    We are inviting public comments on this proposal.
3. Certified EHR Technology for CQMs for the EHR Incentive Programs in 
2016
a. Edition of Certified EHR Technology Requirements in 2016
    As previously stated in the Medicare and Medicaid EHR Incentive 
Programs Stage 2 final rule (77 FR 54051 through 54053), CQM data 
submitted by eligible hospitals and CAHs are required to be captured, 
calculated, and reported using CEHRT. In accordance with this policy, 
for CQM reporting for the Medicare and Medicaid EHR Incentive Programs 
in 2016, eligible hospitals and CAHs must use EHR technology certified 
to at least the 2014 Edition certification criteria for CQMs, which are 
defined at 45 CFR 170.314(c)(1) for the capture of data elements, 45 
CFR 170.314(c)(2) for the calculation of CQMs, and 45 CFR 170.314(c)(3) 
for the submission of CQM data electronically.
    However, in the 2015 Edition proposed rule (80 FR 16810 through 
16872, 16900), ONC has proposed a new Edition of certification criteria 
for EHR technology, which may be available for some providers as early 
as 2016. The 2015 Edition proposed rule (80 FR 16842 through 16846) 
would establish three certification criteria for CQMs and set a 
placeholder for a fourth certification criterion. These three criteria 
are:
     Proposed new Sec.  170.315(c)(1) ``CQMs--record and 
export''--to record and export data which aligns with the prior capture 
criteria.
     Proposed new Sec.  170.315(c)(2) ``CQMs--import and 
calculate''--to import and calculate data which aligns with the prior 
calculate criteria.
     Proposed new Sec.  170.315(c)(4) ``CQMs--filter''--to 
filter data which is a new function for CQM criteria in the 2015 
Edition and is not currently proposed to be required by the EHR 
Incentive Programs.
    ONC proposed (80 FR 16844) to reserve Sec.  170.315(c)(3) ``CQMs--
report''--to report data electronically, including submission testing, 
to be proposed in or with annual IPPS and/or PFS rulemaking. ONC 
believes that, going forward, proposing a 2015 Edition certification 
criterion for CQM reporting with CMS' annual payment rules would allow 
better alignment of ONC's certification policy and standards for 
electronically specified CQM, known as eCQMs, with reporting with other 
CMS programs that include eCQMs, such as the PQRS and Hospital IQR 
Programs, which update their measure specifications on an annual basis 
through rulemaking. Therefore, ONC is proposing a 2015 Edition 
certification criterion for ``CQMs--report'' in section VIII.D.3.b. of 
the preamble of this proposed rule.
b. ``CQMs--Report'' Certification Criterion in ONC's 2015 Edition 
Proposed Rule
    As described previously in section VIII.D.3.a. of the preamble of 
this proposed rule, ONC reserved the 2015 Edition certification 
criterion for ``CQMs--report'' (at proposed new Sec.  170.315(c)(3)) to 
be proposed in conjunction with IPPS and/or PFS rulemaking. The 2014 
Edition certification criterion for CQMs--electronic submission (at 
Sec.  170.314(c)(3)) requires CEHRT to enable a user to electronically 
create a data file for transmission of clinical quality measurement 
data using the Quality Reporting Document Architecture (QRDA) Category 
I and Category III standards, and which can be electronically accepted 
by CMS. The QRDA standard provides a document format and standard 
structure to electronically report clinical quality measure data.\221\ 
The QRDA Category I standard enables an individual patient-level 
quality report that contains quality data for one patient for one or 
more quality measures. The QRDA Category III standard enables an 
aggregate quality report containing calculated summary data for one or 
more measures for a specified population of patients within a 
particular health system over a specific period of time.\222\
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    \221\ Available at: http://www.hl7.org/implement/standards/product_brief.cfm?product_id=35.
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    Building off of the 2014 Edition criterion for submission of CQMs, 
ONC is proposing a 2015 Edition certification criterion for ``CQMs--
report'' \223\ at proposed new Sec.  170.315(c)(3) as part of the 
proposed 2015 Edition of certification criteria that would require a 
certified Health IT Module to enable a user to electronically create a 
data file for transmission of clinical quality measurement data using 
the ``base'' HL7 (that is, industry-wide, non-program-specific) Quality 
Reporting Data Architecture (QRDA) Category I and Category III 
standards, at a minimum. ONC also is proposing to allow optional 
certification for EHRs according to the CMS ``form and manner'' 
requirements defined in CMS' QRDA Implementation Guide \224\ as part of 
this proposed criterion. We reiterate that this proposed certification 
criterion would apply to EPs, eligible hospitals, and CAHs.
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    \223\ As noted in the 2015 Edition proposed rule, ONC proposed 
to title proposed new Sec.  170.315(c)(3) ``CQMs--report'' to better 
align with the use of the term ``report'' throughout the 2015 
Edition. Also, ONC is proposing to discontinue to reference 
``electronic'' in the title of certification criteria as it is 
assumes that all functions performed by certified health IT are done 
electronically. See 80 FR 16844.
    \224\ The CMS QRDA Implementation Guide can be accessed at 
http://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/eCQM_Library.html.
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    CMS anticipates proposing to require EPs, eligible hospitals, and 
CAHs seeking to report CQMs electronically (if using proposed new Sec.  
170.315(c)(3)) as part of meaningful use under the EHR Incentive 
Programs for 2016 to adhere to the additional standards and constraints 
on the QRDA standards for electronic reporting as described in the CMS 
QRDA Implementation Guide. CMS anticipates proposing to revise the 
definition of ``certified electronic health record technology (CEHRT)'' 
at 42 CFR 495.4 to require certification to the optional portion of the 
2015 Edition CQM reporting criterion (proposed at Sec.  170.315(c)(3)) 
in the CY 2016 Medicare Physician Fee Schedule proposed rule later this 
year.
    As noted previously, ONC proposed standards for proposed new Sec.  
170.315(c)(1) and Sec.  170.315(c)(2) in the 2015 Edition proposed rule 
(80 FR 16844), but retained a placeholder for proposed new Sec.  
170.315(c)(3) so that this certification criterion for reporting could 
be proposed in conjunction with the proposals for CMS quality reporting

[[Page 24614]]

programs in the IPPS and PFS rules. Therefore, in this proposed rule, 
for the requirements for the 2015 Edition certification criteria, ONC 
is proposing the following at proposed new Sec.  170.315(c)(3) for 
clinical quality measurement to state that technology certified to the 
2015 Edition must enable a user to electronically create a data file 
for transmission of clinical quality measurement data which is:
     At a minimum, in accordance with the standards specified 
in Sec.  170.205(h) and Sec.  170.205(k); and
     Optionally, can be electronically accepted by CMS.
    The standard specified in Sec.  170.205(h) is the HL7 
Implementation Guide (IG) for CDA Release 2: Quality Reporting Document 
Architecture--Category I, Draft Standard for Trial Use (DSTU) Release 2 
(July 2012).\225\ The standard specified in Sec.  170.205(k) is the HL7 
Implementation Guide for CDA Release 2: Quality Reporting Document 
Architecture--Category III, DSTU Release 2 (November 2012).\226\
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    \225\ Available at: http://www.hl7.org/implement/standards/product_brief.cfm?product_id=35.
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    ONC previously adopted the July 2012 version of the QRDA Category I 
IG and the November 2012 version of the QRDA Category III IG in its 
2014 Edition (77 FR 54232). Given the timing of this proposed rule and 
the expected deliverables for harmonized CQM and clinical decision 
support (CDS) standards (described further in the 2015 Edition proposed 
rule at 80 FR 16842 through 16843), ONC is soliciting comment on a 
series of three options to determine if the version of QRDA Category I 
or the QRDA-like standards it should adopt for the certification 
criterion should be a more recent update to the standard. Specifically, 
ONC is soliciting comment on the following options for individual 
patient-level quality reports (QRDA Category I):
    (1) The July 2012 QRDA Category I IG;
    (2) The July 2012 QRDA Category I IG with the September 2014 
Errata;\227\ and
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    \227\ Available at: http://www.hl7.org/implement/standards/product_brief.cfm?product_id=35. Note that in order to access the 
errata, the user should download the ``HL7 Implementation Guide for 
CDA Release 2: Quality Reporting Document Architecture--Category I, 
DSTU Release 2 (US Realm)'' package.
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    (3) QRDA-like standards for individual patient-level quality 
reports based on the anticipated Quality Improvement and Clinical 
Knowledge (QUICK) \228\ Fast Health Interoperability Resources (FHIR)-
based Draft Standard for Trial Use CQM standards.
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    \228\ Available at: http://www.hl7.org/special/Committees/projman/searchableProjectIndex.cfm?action=edit&ProjectNumber=1045.
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    Option 1 includes the same version of the QRDA Category I standard 
ONC adopted in the 2014 Edition. Option 2 includes this same version 
with the September 2014 Errata, which provides guidance on implementing 
QRDA Category I based on a new version of the underlying information 
model for representing quality measures (that is, the Quality Data 
Model based-Health Quality Measures Format Release 2.1 \229\). Option 3 
would include standards based on the harmonized CQM and CDS standards 
on which the industry is currently developing.
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    \229\ Available at: http://www.hl7.org/implement/standards/product_brief.cfm?product_id=97.
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    ONC is also soliciting comment on a fourth option of QRDA Category 
I standard it could consider adopting for this proposed certification 
criterion:
    (4) The next release of the QRDA Category I IG (Release 3).\230\
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    \230\ http://www.hl7.org/special/Committees/projman/searchableProjectIndex.cfm?action=edit&ProjectNumber=210.
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    While this option was not discussed in the 2015 Edition proposed 
rule, stakeholders have recently made ONC aware that the industry is in 
the process of updating the QRDA Category I to the next Release 3. ONC 
understands that Release 3 is expected to be balloted in May 2015. 
Release 3 would include major updates to align with the Quality Data 
Model, address comments from Release 2, and better align with the 
Consolidated CDA Release 2 used for transitions of care/summary care 
records.
    While not discussed in the 2015 Edition proposed rule, ONC in this 
proposed rule is also soliciting comment on three options for 
aggregate-level quality reports (QRDA Category III) it could adopt for 
this certification criterion:
    (1) The November 2012 QRDA Category III IG;
    (2) The November 2012 QRDA Category III IG with the September 2014 
Errata; \231\ and
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    \231\ http://www.hl7.org/implement/standards/product_brief.cfm?product_id=286. Note that in order to access the 
errata, the user should download the ``HL7 Implementation Guide for 
CDA Release 2: Quality Reporting Document Architecture--Category 
III, DSTU Release 1 (US Realm)'' package.
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    (3) QRDA-like standards for aggregate-level quality reports based 
on the anticipated Quality Improvement and Clinical Knowledge (QUICK) 
\232\ Fast Health Interoperability Resources (FHIR)-based Draft 
Standard for Trial Use CQM standards.
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    \232\ Available at: http://www.hl7.org/special/Committees/projman/searchableProjectIndex.cfm?action=edit&ProjectNumber=1045.
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    Option 1 includes the same version of the QRDA Category III 
standard which ONC adopted in the 2014 Edition. Option 2 includes this 
same version with the September 2014 Errata, which provides guidance on 
implementing QRDA Category III based on a new version of the underlying 
information model for representing quality measures (that is, the 
Quality Data Model based-Health Quality Measures Format Release 2.1 
\233\). Option 3 would include standards based on the harmonized CQM 
and CDS standards on which the industry is currently developing.
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    \233\ Available at: http://www.hl7.org/implement/standards/product_brief.cfm?product_id=97.
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    In connection with ONC, we are inviting public comment on these 
options and this proposal.
4. CQM Development and Certification Cycle
    We stated in the Stage 2 final rule (77 FR 54055) that we do not 
intend to use notice and comment rulemaking as the means to update or 
modify CQM specifications. Given the necessity to update CQM 
specifications after they have been published to ensure their continued 
clinical relevance, accuracy, and validity, we publish annual updates 
to the electronic specifications for EHR submission. Although we 
require eligible hospitals and CAHs to submit the most updated versions 
of CQMs when reporting electronically, CEHRT is not required to be 
recertified on annual basis. CMS and ONC understand that standards for 
electronically representing CQMs continue to evolve, and believe there 
may be value in retesting certified Health IT Modules (including CEHRT) 
periodically to ensure that CQMs are being accurately calculated and 
represented, and that they can be reported to CMS in the ``form and 
manner'' required for the Hospital IQR Program and EHR Incentive 
Program. As mentioned previously, CMS and ONC encourage health IT 
developers to retest their certified technology annually, and are 
soliciting comment on the appropriate frequency for requiring retesting 
and recertification to the most updated versions of CQMs and most 
recent ``form and manner'' reporting requirements.
    However, given the continuing evolution of technology and clinical 
standards, as well as the need for a predictable cycle from measure 
development to provider data submission, CMS intends to publish a 
request for information (RFI) on the establishment of an ongoing cycle 
for

[[Page 24615]]

the introduction and certification of new measures, the testing of 
updated measures, and the testing and certification of submission 
capabilities. We encourage readers to submit their insights and 
recommendations for our consideration upon publication of that RFI.

IX. MedPAC Recommendations

    Under section 1886(e)(4)(B) of the Act, the Secretary must consider 
MedPAC's recommendations regarding hospital inpatient payments. Under 
section 1886(e)(5) of the Act, the Secretary must publish in the annual 
proposed and final IPPS rules the Secretary's recommendations regarding 
MedPAC's recommendations. We have reviewed MedPAC's March 2015 ``Report 
to the Congress: Medicare Payment Policy'' and have given the 
recommendations in the report consideration in conjunction with the 
proposed policies set forth in this proposed rule. MedPAC 
recommendations for the IPPS for FY 2016 are addressed in Appendix B to 
this proposed rule.
    For further information relating specifically to the MedPAC reports 
or to obtain a copy of the reports, contact MedPAC at (202) 653-7226, 
or visit MedPAC's Web site at: http://www.medpac.gov.

X. Other Required Information

A. Requests for Data From the Public

    In order to respond promptly to public requests for data related to 
the prospective payment system, we have established a process under 
which commenters can gain access to raw data on an expedited basis. 
Generally, the data are now available on compact disc (CD) format. 
However, many of the files are available on the Internet at: http://
www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/
AcuteInpatientPPS/index.html. Data files and the cost for each file, if 
applicable, are listed below. Anyone wishing to purchase data tapes, 
cartridges, or diskettes should submit a written request along with a 
company check or money order (payable to CMS-PUF) to cover the cost to 
the following address: Centers for Medicare & Medicaid Services, Public 
Use Files, Accounting Division, P.O. Box 7520, Baltimore, MD 21207-
0520, (410) 786-3691. Files on the Internet may be downloaded without 
charge.
1. CMS Wage Data Public Use File
    This file contains the hospital hours and salaries from Worksheet 
S-3, Parts II and III from FY 2012 Medicare cost reports used to create 
the proposed FY 2016 prospective payment system wage index. Multiple 
versions of this file are created each year. For a complete schedule on 
the release of different versions of this file, we refer readers to the 
wage index schedule in section III.L. of the preamble of this proposed 
rule.

------------------------------------------------------------------------
                                                Wage data    PPS Fiscal
               Processing year                    year          year
------------------------------------------------------------------------
2015........................................          2012          2016
2014........................................          2011          2015
2013........................................          2010          2014
2012........................................          2009          2013
2011........................................          2008          2012
2010........................................          2007          2011
2009........................................          2006          2010
2008........................................          2005          2009
2007........................................          2004          2008
------------------------------------------------------------------------

    Media: Internet at: http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp#TopOfPage.
    Periods Available: FY 2007 through FY 2016 IPPS Update.
2. CMS Occupational Mix Data Public Use File
    This file contains the CY 2013 occupational mix survey data to be 
used to compute the occupational mix adjustment wage indexes. Multiple 
versions of this file are created each year. For a complete schedule on 
the release of different versions of this file, we refer readers to the 
wage index schedule in section III.L. of the preamble of this proposed 
rule.
    Media: Internet at: http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp#TopOfPage.
    Period Available: FY 2016 IPPS Update.
3. Provider Occupational Mix Adjustment Factors for Each Occupational 
Category Public Use File
    This file contains each hospital's occupational mix adjustment 
factors by occupational category. Two versions of these files are 
created each year to support the rulemaking.
    Media: Internet at: http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp#TopOfPage.
    Period Available: FY 2016 IPPS Update.
4. Other Wage Index Files
    CMS releases other wage index analysis files after each proposed 
and final rule.
    Media: Internet at: http://www.cms.hhs.gov/AcuteInpatientPPS/WIFN/list.asp#TopOfPage.
    Periods Available: FY 2005 through FY 2016 IPPS Update.
5. FY 2016 IPPS SSA/FIPS CBSA State and County Crosswalk
    This file contains a crosswalk of State and county codes used by 
the Social Security Administration (SSA) and the Federal Information 
Processing Standards (FIPS), county name, and a list of Core-Based 
Statistical Areas (CBSAs).
    Media: Internet at: http://www.cms.hhs.gov/AcuteInpatientPPS/FFD/list.asp#TopOfPage.
    Period Available: FY 2016 IPPS Update.
6. HCRIS Cost Report Data
    The data included in this file contain cost reports with fiscal 
years ending on or after September 30, 1996. These data files contain 
the highest level of cost report status.
    Media: Internet at: http://www.cms.hhs.gov/CostReports/02_HospitalCostReport.asp.
    There are no longer data offered on a CD. All of the data collected 
are now available on the following Web site free for download: http://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/Cost-Reports/?redirect=/CostReports/
7. Provider-Specific File
    This file is a component of the PRICER program used in the MAC's 
system to compute DRG/MS-DRG payments for individual bills. The file 
contains records for all prospective payment system eligible hospitals, 
including hospitals in waiver States, and data elements used in the 
prospective payment system recalibration processes and related 
activities. Beginning with December 1988, the individual records were 
enlarged to include pass-through per diems and other elements.
    Media: Internet at: http://www.cms.hhs.gov/ProspMedicareFeeSvcPmtGen/03_psf_text.asp
    Period Available: Quarterly Update.
8. CMS Medicare Case-Mix Index File
    This file contains the Medicare case-mix index by provider number 
as published in each year's update of the Medicare hospital inpatient 
prospective payment system. The case-mix index is a measure of the 
costliness of cases treated by a hospital relative to the cost of the 
national average of all Medicare hospital cases, using DRG/MS-DRG 
weights as a measure of relative costliness of cases. Two versions of 
this file are created each year to support the rulemaking.

[[Page 24616]]

    Media: Internet at: http://www.cms.hhs.gov/AcuteInpatientPPS/FFD/list.asp#TopOfPage
    Periods Available: FY 1985 through FY 2016.
9. MS-DRG Relative Weights (Also Table 5--MS-DRGs)
    This file contains a listing of MS-DRGs, MS-DRG narrative 
descriptions, relative weights, and geometric and arithmetic mean 
lengths of stay for each fiscal year. Two versions of this file are 
created each year to support the rulemaking.
    Media: Internet at: http://www.cms.hhs.gov/AcuteInpatientPPS/FFD/list.asp#TopOfPage
    Periods Available: FY 2005 through FY 2016 IPPS Update
10. IPPS Payment Impact File
    This file contains data used to estimate payments under Medicare's 
hospital impatient prospective payment systems for operating and 
capital-related costs. The data are taken from various sources, 
including the Provider-Specific File, HCRIS Cost Report Data, MedPAR 
Limited Data Sets, and prior impact files. The data set is abstracted 
from an internal file used for the impact analysis of the changes to 
the prospective payment systems published in the Federal Register. Two 
versions of this file are created each year to support the rulemaking.
    Media: Internet at: http://www.cms.hhs.gov/AcuteInpatientPPS/HIF/list.asp#TopOfPage.
    Periods Available: FY 1994 through FY 2016 IPPS Update.
11. AOR/BOR Tables
    This file contains data used to develop the MS-DRG relative 
weights. It contains mean, maximum, minimum, standard deviation, and 
coefficient of variation statistics by MS-DRG for length of stay and 
standardized charges. The BOR tables are ``Before Outliers Removed'' 
and the AOR is ``After Outliers Removed.'' (Outliers refer to 
statistical outliers, not payment outliers.)
    Two versions of this file are created each year to support the 
rulemaking.
    Media: Internet at: http://www.cms.hhs.gov/AcuteInpatientPPS/FFD/list.asp#TopOfPage.
    Periods Available: FY 2005 through FY 2016 IPPS Update.
12. Prospective Payment System (PPS) Standardizing File
    This file contains information that standardizes the charges used 
to calculate relative weights to determine payments under the hospital 
inpatient operating and capital prospective payment systems. Variables 
include wage index, cost-of-living adjustment (COLA), case-mix index, 
indirect medical education (IME) adjustment, disproportionate share, 
and the Core-Based Statistical Area (CBSA). The file supports the 
rulemaking.
    Media: Internet at: http://www.cms.hhs.gov/AcuteInpatientPPS/FFD/list.asp#TopOfPage.
    Period Available: FY 2016 IPPS Update.
13. Hospital Readmissions Reduction Program File
    This file contains information on the calculation of the Hospital 
Readmissions Reduction Program payment adjustment. Variables include 
the proxy excess readmission ratios for acute myocardial infarction 
(AMI), pneumonia (PN) and heart failure (HF), coronary obstruction 
pulmonary disease (COPD), and total hip arthroplasty (THA)/total knee 
arthroplasty (TKA) and the proxy readmissions payment adjustment for 
each provider included in the program. In addition, the file contains 
information on the number of cases for each of the applicable 
conditions excluded in the calculation of the readmission payment 
adjustment factors, and it contains MS-DRG relative weight information 
to estimate the payment adjustment factors. The file supports the 
rulemaking.
    Media: Internet at: http://www.cms.hhs.gov/AcuteInpatientPPS/FFD/list.asp#TopOfPage.
    Period Available: FY 2016 IPPS Update.
    For further information concerning these data tapes, contact the 
CMS Public Use Files Hotline at (410) 786-3691.
14. Medicare Disproportionate Share Hospital (DSH) Supplemental File
    This file contains information on the calculation of the 
uncompensated care payments for FY 2016. Variables include a hospital's 
SSI days and Medicaid days used to determine a hospital's share of 
uncompensated care payments, total uncompensated care payments and 
estimated per claim uncompensated care payment amounts. The file 
supports the rulemaking.
    Media: Internet at: http://www.cms.hhs.gov/AcuteInpatientPPS/FFD/list.asp#TopOfPage.
    Period Available: FY 2016 IPPS Update.
    Commenters interested in discussing any data used in constructing 
this proposed rule should contact Chioma Obi at (410) 786-6050.

B. Collection of Information Requirements

1. Statutory Requirement for Solicitation of Comments
    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    In this proposed rule, we are soliciting public comment on each of 
these issues for the following sections of this document that contain 
information collection requirements (ICRs).
2. ICRs for Add-On Payments for New Services and Technologies
    Section II.I.1. of the preamble of the proposed rule discusses add-
on payments for new services and technologies. Specifically, this 
section states that applicants for add-on payments for new medical 
services or technologies for FY 2017 must submit a formal request. A 
formal request includes a full description of the clinical applications 
of the medical service or technology and the results of any clinical 
evaluations demonstrating that the new medical service or technology 
represents a substantial clinical improvement. In addition, the request 
must contain a significant sample of the data to demonstrate that the 
medical service or technology meets the high-cost threshold.
    We believe the burden associated with this requirement is exempt 
from the PRA under 5 CFR 1320.3(c), which defines the agency collection 
of information subject to the requirements of the PRA as information 
collection imposed on 10 or more persons within any 12-month period. 
This information collection does not impact 10 or more entities in a 
12-month period. For FYs 2008, 2009, 2010, 2011, 2012, 2013, 2014, 
2015, and 2016, we received 1, 4,

[[Page 24617]]

5, 3, 3, 5, 5, 7, and 9 applications, respectively.
3. ICRs for the Proposed Occupational Mix Adjustment to the Proposed FY 
2016 Wage Index (Hospital Wage Index Occupational Mix Survey)
    Section III.F. of the preamble of this proposed rule discusses the 
proposed occupational mix adjustment to the proposed FY 2016 wage 
index, respectively. While the preamble of this proposed rule does not 
contain any new ICRs, we note that there is an OMB approved information 
collection request associated with the hospital wage index.
    Section 304(c) of Public Law 106-554 amended section 1886(d)(3)(E) 
of the Act to require CMS to collect data at least once every 3 years 
on the occupational mix of employees for each short-term, acute care 
hospital participating in the Medicare program in order to construct an 
occupational mix adjustment to the wage index. We collect the data via 
the occupational mix survey.
    The burden associated with this information collection requirement 
is the time and effort required to collect and submit the data in the 
Hospital Wage Index Occupational Mix Survey to CMS. The aforementioned 
burden is subject to the PRA; it is currently approved under OMB 
control number 0938-0907.
4. Hospital Applications for Geographic Reclassifications by the MGCRB
    Section III.J.2. of the preamble of this proposed rule discusses 
proposed changes to the wage index based on hospital reclassifications. 
As stated in that section, under section 1886(d)(10) of the Act, the 
MGCRB has the authority to accept short-term IPPS hospital applications 
requesting geographic reclassification for wage index and to issue 
decisions on these requests by hospitals for geographic 
reclassification for purposes of payment under the IPPS.
    The burden associated with this application process is the time and 
effort necessary for an IPPS hospital to complete and submit an 
application for reclassification to the MGCRB. The burden associated 
with this requirement is subject to the PRA. It is currently approved 
under OMB control number 0938-0573.
5. Proposed Elimination of the Simplified Cost Allocation Methodology 
for Hospitals
    In section IV.H. of the preamble of this proposed rule, we are 
proposing to amend the regulations at 42 CFR 412.302(d)(4) to limit a 
hospital's ability to elect the simplified cost allocation methodology 
under the terms and conditions provided in the instructions for CMS 
Form 2552 to cost reporting periods beginning before October 1, 2015. 
We are proposing to limit the election of the simplified cost 
allocation methodology because the allocation of the costs of capital-
related movable equipment using this methodology yields less precise 
calculated CCRs. Currently, less than 1 percent of hospitals have 
elected to use the simplified cost allocation methodology. Based on FY 
2013 data, only 9 of 1,269 CAHs and 23 of 4,389 hospitals other than 
CAHs used the simplified cost allocation methodology. Furthermore, we 
believe that advances in technology have reduced the cost of 
recordkeeping, which has allowed hospitals to maintain accurate 
statistical data and afforded them the flexibility to change to a more 
precise allocation methodology.
    Although we are proposing to eliminate the simplified cost 
allocation methodology for hospitals, we believe the currently approved 
burden estimates for the Hospital and Health Care Complex Cost Report 
(OMB control number 0938-0050) are still applicable to hospitals 
completing the Hospital and Health Care Complex Cost Report. The time 
required to address this proposed revision would be subsumed in the 
total burden estimate for an entity to comply with all of the 
requirements in the cost report.
6. ICRs for the Hospital Inpatient Quality Reporting (IQR) Program
    The Hospital IQR Program (formerly referred to as the Reporting 
Hospital Quality Data for Annual Payment (RHQDAPU) Program) was 
originally established to implement section 501(b) of the MMA, Public 
Law 108-173. This program expanded our voluntary Hospital Quality 
Initiative. The Hospital IQR Program originally consisted of a 
``starter set'' of 10 quality measures. The collection of information 
associated with the original starter set of quality measures was 
previously approved under OMB control number 0938-0918. All of the 
information collection requirements previously approved under OMB 
control number 0938-0918 have been combined with the information 
collection request previously approved under OMB control number 0938-
1022. We no longer use OMB control number 0938-0918.
    We added additional quality measures to the Hospital IQR Program 
and submitted the information collection request to OMB for approval. 
This expansion of the Hospital IQR measures was part of our 
implementation of section 5001(a) of the Deficit Reduction Act of 2005 
(DRA). Section 1886(b)(3)(B)(viii)(III) of the Act, added by section 
5001(a) of the DRA, requires that the Secretary expand the ``starter 
set'' of 10 quality measures that were established by the Secretary as 
of November 1, 2003, to include measures ``that the Secretary 
determines to be appropriate for the measurement of the quality of care 
furnished by hospitals in inpatient settings.'' The burden associated 
with these reporting requirements is currently approved under OMB 
control number 0938-1022.
    In this proposed rule, we are proposing refinements to the measure 
cohorts for: (1) The Hospital 30-Day All-Cause, Risk-Standardized 
Mortality Rate (RSMR) following Pneumonia Hospitalization measure (NQF 
#0468); and (2) the Hospital 30-Day All-Cause, Risk-Standardized 
Readmission Rate (RSRR) following Pneumonia Hospitalization measure 
(NQF #0506). We also are proposing eight additional measures to be 
added to the Hospital IQR Program measure set beginning with the FY 
2018 payment determination and for subsequent years. Seven of these 
measures are claims-based, and one measure is structural. The eight new 
measures are: (1) Hospital Survey on Patient Safety Culture 
(structural); (2) Kidney/UTI Clinical Episode-Based Payment (claims-
based); (3) Cellulitis Clinical Episode-Based Payment (claims-based); 
(4) Gastrointestinal Hemorrhage Clinical Episode-Based Payment (claims-
based); (5) Lumbar Spine Fusion/Re-Fusion Clinical Episode-Based 
Payment (claims-based); (6) Hospital-Level, Risk-Standardized Payment 
Associated with an Episode-of-Care for Primary Elective THA/TKA 
(claims-based); (7) Excess Days in Acute Care after Hospitalization for 
Acute Myocardial Infarction (claims-based); and (8) Excess Days in 
Acute Care after Hospitalization for Heart Failure (claims-based).
    Because these claims-based measures can be calculated based on data 
that are already reported to the Medicare program for payment purposes, 
we believe no additional information collection will be required from 
the hospitals for the seven proposed claims-based measures. In 
addition, the burden associated with the structural measure we are 
proposing, Hospital Survey on Patient Safety Culture, is expected to be 
negligible; therefore, its proposed addition will not result in a 
significant burden increase.
    We also are proposing nine measures for removal. We believe that 
there will be a reduction in burden for hospitals due to our proposed 
removal of seven of

[[Page 24618]]

these measures, which are chart-abstracted: (1) STK-01 Venous 
Thromboembolism Prophylaxis (NQF #0434); (2) STK-06: Discharged on 
Statin Medication* (NQF #0439); (3) STK-08: Stroke Education* (NQF 
endorsement removed); (4) VTE-1: Venous Thromboembolism Prophylaxis* 
(NQF #0371); (5) VTE-2: Intensive Care Unit Venous Thromboembolism 
Prophylaxis* (NQF #0372); (6) VTE-3: Venous Thromboembolism Patients 
with Anticoagulation Overlap Therapy* (NQF #0373); and (7) AMI-7a 
Fibrinolytic Therapy Received Within 30 Minutes of Hospital Arrival* 
(NQF #0164). (An asterisk (*) indicates that the measure is proposed 
for retention as an electronic clinical quality measure for the FY 2018 
payment determination in section VIII.A.8. of the preamble of this 
proposed rule.) Due to the burden associated with the collection of 
chart-abstracted data, we estimate that the proposed removal of AMI-7a 
would result in a burden reduction of approximately 219,000 hours 
across all hospitals. We estimate that the proposed removal of seven 
chart-abstracted measures will result in a burden reduction of 
approximately 522,000 hours across all hospitals.
    Two of the nine measures proposed for removal have been previously 
suspended from the Hospital IQR Program. Therefore, their proposed 
removal would not affect burden to hospitals. These measures are: IMM-1 
Pneumococcal Immunization (NQF #1653); and SCIP-Inf-4 Cardiac Surgery 
Patients with Controlled Postoperative Blood Glucose (NQF #0300). The 
suspension of IMM-1 is currently reflected under OMB control number 
0938-1022. The suspension of SCIP-Inf-4, which was formalized on 
January 9, 2015,\234\ will be reflected in the PRA package being 
submitted this year under OMB control number 0938-1022.
---------------------------------------------------------------------------

    \234\ QualityNet. Available at: https://www.qualitynet.org/dcs/BlobServer?blobkey=id&blobnocache=true&blobwhere=1228890406532&blobheader=multipart%2Foctet-stream&blobheadername1=Content-Disposition&blobheadervalue1=attachment%3Bfilename%3D2015-02-IP.pdf&blobcol=urldata&blobtable=MungoBlobs.
---------------------------------------------------------------------------

    For the FY 2018 payment determination and subsequent years, we also 
are proposing to require hospitals to submit 16 measures electronically 
for the Hospital IQR Program in a manner that would permit eligible 
hospitals to partially align Hospital IQR Program requirements with 
some requirements under the Medicare EHR Incentive Program. We believe 
that the total burden associated with the electronic clinical quality 
measure reporting proposal will be similar to the burden outlined for 
hospitals in the EHR Incentive Program Stage 2 final rule (77 FR 54126 
through 54133). In that final rule, the burden estimate for a hospital 
to attest and report all 16 electronic clinical quality measures is 2 
hours and 40 minutes per submission (77 FR 54132). We believe that this 
estimate is accurate and appropriate to also apply to the Hospital IQR 
Program, given the alignment between the electronic clinical quality 
measure reporting requirements for both programs. In total, we expect 
the burden associated with our proposal to require hospitals to report 
electronic clinical quality measures to be 5 hours and 20 minutes per 
hospital for two quarters of data submission, and 17,600 hours total 
for two quarters of data submission across the approximately 3,300 
hospitals participating in the Hospital IQR Program. We estimate that 
reporting these electronic clinical quality measures can be 
accomplished by staff with a mean hourly wage of $16.42 per hour.\235\ 
Under OMB Circular A-76, in calculating direct labor, agencies should 
not only include salaries and wages, but also ``other entitlements'' 
such as fringe benefits.\236\ This Circular provides that the civilian 
position full fringe benefit cost factor is 36.25 percent. Therefore, 
using these assumptions, we estimate an hourly labor cost of $22.37 
($16.42 base salary + $5.95 fringe) and a total cost of $393,712 
(17,600 hours x $22.37 per hour) across approximately 3,300 hospitals 
participating in the Hospital IQR Program to report 16 electronic 
clinical quality measures for two quarters (Q3 and Q4).
---------------------------------------------------------------------------

    \235\ http://www.bls.gov/ooh/healthcare/medical-records-and-health-information-technicians.html.
    \236\ http://www.whitehouse.gov/omb/circulars_a076_a76_incl_tech_correction.
---------------------------------------------------------------------------

    For validation of chart-abstracted data for the FY 2018 payment 
determination and subsequent years, we require hospitals to provide 72 
charts per hospital per year (with an average page length of 1,500), 
including 40 charts for HAI validation and 32 charts for clinical 
process of care validation, for a total of 108,000 pages per hospital 
per year. We reimburse hospitals at 12 cents per photocopied page (79 
FR 50346) for a total per hospital cost of $12,960. For hospitals 
providing charts digitally via a re-writable disc, such as encrypted 
CD-ROMs, DVDs, or flash drives, we will reimburse hospitals at a rate 
of 40 cents per disc.
    Under OMB number 0938-1022, we estimated that the total burden for 
the FY 2017 payment determination was 1,781 hours per hospital and 5.9 
million hours across approximately 3,300 hospitals participating in the 
Hospital IQR Program. Using data on chart-abstracted measures from the 
3rd quarter in 2013 through the 2nd quarter in 2014, we have revised 
our burden estimate to include updates to the number of records 
reported per measure set, as well as the time associated with data 
collection. Considering the proposals described in this proposed rule, 
as well as our updated estimates for the number of records reported and 
the time associated with data reporting activities, we estimate a total 
burden of 2,293 hours per hospital and 7.6 million hours across 
approximately 3,300 hospitals participating in the Hospital IQR Program 
for the FY 2018 payment determination. This burden estimate includes 
the full measure set proposed for the Hospital IQR Program FY 2018 
payment determination and accounts for burden changes associated with 
all newly proposed measures as well as measures proposed for removal, 
as discussed above in this section.
    In addition, this burden estimate accounts for other activities 
such as population and sampling, reviewing reports for claims-based 
measure sets, HAI validation templates, as well as all other forms and 
structural measures. The estimate excludes the burden associated with 
the NHSN and HCAHPS measures, both of which are submitted under 
separate information collection requests and are approved under OMB 
control numbers 0920-0666 and 0938-0981, respectively. The burden 
estimates in this proposed rule are the estimates for which we are 
requesting OMB approval.
7. ICRs for PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) 
Program
    As discussed in section VIII.B. of the preamble of this proposed 
rule, section 1866(k)(1) of the Act requires, for purposes of FY 2014 
and each subsequent fiscal year, that a hospital described in section 
1886(d)(1)(B)(v) of the Act (a PPS-exempt cancer hospital, or a PCH) 
submit data in accordance with section 1866(k)(2) of the Act with 
respect to such fiscal year.
    In section VIII.B.5 of the preamble of this proposed rule, we are 
proposing that PCHs will submit data on three additional measures 
beginning with the FY 2018 program: (1) CDCNHSN Facility-Wide Inpatient 
Hospital-Onset Methicillin-Resistant Staphylococcus aureus (MRSA) 
Bacteremia Outcome Measure (NQF #1716); (2) CDC NHSN Facility-Wide 
Inpatient Hospital-Onset Clostridium difficile Infection (CDI) Outcome 
Measure (NQF #1717); and (3)

[[Page 24619]]

CDC NHSN Influenza Vaccination Coverage Among Healthcare Personnel 
Measure (NQF #0431). In conjunction with our proposal in section 
VIII.B.2. of the preamble of this proposed rule to remove the six SCIP 
measures from the PCHQR Program beginning with fourth quarter (Q4) 2015 
discharges and for subsequent years, the PCHQR measure set would 
consist of 16 measures beginning with the FY 2018 program.
    With respect to our proposal to add three measures beginning with 
the FY 2018 program, this estimate excludes the burden associated with 
two of these measures (the CDC NHSN MRSA measure and the CDC NHSN CDI 
measure) both of which are submitted under separate information 
collection requests and are approved under a separate OMB control 
numbers (0920-0666).\237\ Using the same methodology as the FY2015 
IPPS/LTCH PPS final rule,\238\ for the third proposed new measure (CDC 
NHSN Influenza Vaccination Coverage Among Healthcare Personnel 
measure), we estimate that it will take 10 minutes annually per PCH, or 
an additional 1.83 hours for all PCHs annually to report the 
measure.\239\
---------------------------------------------------------------------------

    \237\ OMB Control Number History. Available at: http://www.reginfo.gov/public/do/PRAOMBHistory?ombControlNumber=0920-0666.
    \238\ FY 2015 IPPS/LTCH PPS final rule (79 FR 50443 through 
50444).
    \239\ Ibid.
---------------------------------------------------------------------------

    Our proposal to remove six SCIP measures would reduce the burden 
experienced by PCHs. We estimate a reduction in hourly burden of 6,468 
\240\ hours per year beginning with Q4 2015 and for subsequent program 
years across the 11 PCHs.
---------------------------------------------------------------------------

    \240\ [(49 cases per measure x 4 quarters) + 0.5 (abstraction/
training time)] x 11 PCHs = 6,468 hours per year.
---------------------------------------------------------------------------

    In summary, as a result of our proposals, we estimate a reduction 
of 6,466.17 \241\ hours of burden per year associated with the 
proposals above for all 11 PCHs beginning with the FY 2018 program. 
Coupled with our estimated salary costs,\242\ we estimate that these 
proposed changes would result in a reduction in annual labor costs of 
$426,767.22 beginning with the FY 2018 PCHQR Program.
---------------------------------------------------------------------------

    \241\ 6,468 hours-1.83 hours = 6,466.17 hours.
    \242\ 6,466.17 hours * $66/hour. [We are now estimating an 
hourly salary of $33 (http://swz.salary.com/salarywizard/Staff-Nurse-RN-Hourly-Salary-Details.aspx). After accounting for employee 
benefits and overhead, this results in a total cost of $66 per labor 
hour]
---------------------------------------------------------------------------

8. ICRs for the Hospital Value-Based Purchasing (VBP) Program
    In section IV.F. of the preamble of the proposed rule, we discuss 
proposed requirements for the Hospital VBP Program. Specifically, in 
this proposed rule, we are proposing to adopt one new measure beginning 
with the FY 2018 program year, the 3-Item Care Transition Measure (CTM-
3) (NQF #0228). We also are proposing to adopt one new measure 
beginning with the FY 2021 program year, the Hospital 30-Day, All-
Cause, Risk-Standardized Mortality Rate (RSMR) Following Chronic 
Obstructive Pulmonary Disease (COPD) Hospitalization Measure (NQF 
#1893) (MORT-30-COPD).
    As required under section 1886(o)(2)(A) of the Act, both of these 
additional measures are required for the Hospital IQR Program. 
Therefore, their inclusion in the Hospital VBP Program does not result 
in any additional burden because the Hospital VBP Program uses data 
that are required for the Hospital IQR Program.
9. ICRs for the Long-Term Care Hospital Quality Reporting Program (LTCH 
QRP)
    As discussed in sections VIII.C.5.a and VIII.C.5.b. of the preamble 
of this proposed rule, we are retaining the following 12 previously 
finalized quality measures for use in the LTCH QRP:

 LTCH QRP Quality Measures Previously Adopted for the FY 2015 and FY 2016 Payment Determinations and Subsequent
                                                      Years
----------------------------------------------------------------------------------------------------------------
                                                                                          Final rule(s) in which
                NQF ID                      Measure title        Payment determination    measure was finalized
----------------------------------------------------------------------------------------------------------------
NQF #0138............................  National Health Safety   FY 2015 payment          FY 2012 IPPS/LTCH PPS
                                        Network (NHSN)           determination and        final rule; updated in
                                        Catheter-Associated      subsequent years.        FY 2013 IPPS/LTCH PPS
                                        Urinary Tract                                     final rule.
                                        Infection (CAUTI)
                                        Outcome Measure.
NQF #0139............................  National Health Safety   FY 2015 payment          FY 2012 IPPS/LTCH PPS
                                        Network (NHSN) Central   determination and        final rule; updated in
                                        Line-Associated Blood    subsequent years.        FY 2013 IPPS/LTCH PPS
                                        Stream Infection                                  final rule.
                                        (CLABSI) Outcome
                                        Measure.
NQF #0678............................  Percent of Residents or  FY 2015 payment          FY 2012 IPPS/LTCH PPS
                                        Patients with Pressure   determination and        final rule; updated in
                                        Ulcers That Are New or   subsequent years *.      FY 2014 IPPS/LTCH PPS
                                        Worsened (Short Stay).                            final rule.
NQF #0680............................  Percent of Residents or  FY 2016 payment          FY 2015 IPPS/LTCH PPS
                                        Patients Who Were        determination and        final rule.
                                        Assessed and             subsequent years.
                                        Appropriately Given
                                        the Seasonal Influenza
                                        Vaccine (Short Stay).
NQF #0431............................  Influenza Vaccination    FY 2016 payment          FY 2015 IPPS/LTCH PPS
                                        Coverage among           determination and        final rule.
                                        Healthcare Personnel.    subsequent years.
----------------------------------------------------------------------------------------------------------------
* Proposed in this FY 2016 IPPS/LTCH PPS proposed rule for the FY 2018 payment determination and subsequent
  years


 LTCH QRP Quality Measures Previously Adopted for the FY 2017 and FY 2018 Payment Determinations and Subsequent
                                                      Years
----------------------------------------------------------------------------------------------------------------
                                                                                          Final rule(s) in which
                NQF ID                      Measure title        Payment determination    measure was finalized
----------------------------------------------------------------------------------------------------------------
NQF #1716............................  National Healthcare      FY 2017 and Subsequent   FY 2014 IPPS/LTCH PPS
                                        Safety Network (NHSN)    Years.                   final rule.
                                        Facility-Wide
                                        Inpatient Hospital-
                                        Onset Methicillin-
                                        Resistant
                                        Staphylococcus aureus
                                        (MRSA) Bacteremia
                                        Outcome Measure.
NQF #1717............................  National Healthcare      FY 2017 payment          FY 2014 IPPS/LTCH PPS
                                        Safety Network (NHSN)    determination and        final rule.
                                        Facility-Wide            subsequent years.
                                        Inpatient Hospital-
                                        Onset Clostridium
                                        difficile Infection
                                        (CDI) Outcome Measure.

[[Page 24620]]

 
NQF #2512............................  All-Cause Unplanned      FY 2017 payment          FY 2014 IPPS/LTCH PPS
                                        Readmission Measure      determination and        final rule.
                                        for 30 Days              subsequent years **.
                                        Post[dash]Discharge
                                        from Long-Term Care
                                        Hospitals **.
Application of NQF #0674.............  Percent of Residents     FY 2018 payment          FY 2014 IPPS/LTCH PPS
                                        Experiencing One or      determination and        final rule.
                                        More Falls with Major    subsequent years **.
                                        Injury (Long Stay).
NQF #2631 *..........................  Functional Status        FY 2018 payment          FY 2015 IPPS/LTCH PPS
                                        Quality Measure:         determination and        final rule.
                                        Percent of Long-Term     subsequent years.
                                        Care Hospital Patients
                                        with an Admission and
                                        Discharge Functional
                                        Assessment and a Care
                                        Plan That Addresses
                                        Function.
NQF #2632 *..........................  Functional Status        FY 2018 payment          FY 2015 IPPS/LTCH PPS
                                        Quality Measure:         determination and        final rule.
                                        Functional Outcome       subsequent years.
                                        Measure: Change in
                                        Mobility among Long-
                                        Term Care Hospital
                                        Patients Requiring
                                        Ventilator Support.
Not NQF endorsed.....................  National Healthcare      FY 2018 payment          FY 2015 IPPS/LTCH PPS
                                        Safety Network (NHSN)    determination and        final rule.
                                        Ventilator-Associated    subsequent years.
                                        Event (VAE) Outcome
                                        Measure.
----------------------------------------------------------------------------------------------------------------
* Under review at NQF. We refer readers to: http://www.qualityforum.org/ProjectMeasures.aspx?projectID=73867,
  NQF #2631 and NQF #2632.
** Proposed in this FY 2016 IPPS/LTCH PPS proposed rule for the FY 2018 payment determination and subsequent
  years

    As discussed in sections VIII.C.6.a. through c. of the preamble of 
this proposed rule, we are proposing three previously finalized quality 
measures for use in the LTCH QRP for the FY 2018 payment determination 
and subsequent years. We are proposing two of these measures in order 
to establish their use as cross-setting measures that satisfy the 
required addition of quality measures under the domains of skin 
integrity and incidence of major falls, as mandated by section 1899B of 
the Act, as added by the IMPACT Act of 2014: Patients or Residents with 
Pressure Ulcers that are New or Worsened (NQF #0678), and an 
Application of Percent of Residents Experiencing One or More Falls with 
Major Injury (Long Stay) (NQF #0674). We are proposing a third 
previously finalized measure, All-Cause Unplanned Readmission Measure 
for 30 Days Post-Discharge From Long-Term Care Hospitals (NQF #2512), 
in order to establish the newly NQF-endorsed status of this measure.
    Finally, as discussed in sections VIII.C.6.d. of the preamble of 
this proposed rule, for the FY 2018 payment determination and 
subsequent years we are proposing the addition of one new quality 
measure to the LTCHQR Program: Cross-Setting Functional Status Process 
Measure: an application of Percent of Patients or Residents with an 
Admission and Discharge Functional Assessment and a Care Plan that 
Addresses Function (NQF #2631; under review). This measure satisfies 
the addition of a quality measure under the third initially required 
domain of functional status, as mandated by section 1899B of the Act as 
added by the IMPACT Act of 2014.
    Six of the measures being retained in this FY 2016 IPPS/LTCH PPS 
proposed rule are currently collected via the CDC NHSN. The NHSN is a 
secure, Internet-based HAI tracking system maintained and managed by 
the CDC. The NHSN enables healthcare facilities to collect and use data 
about HAIs, adherence to clinical practices known to prevent HAIs, and 
other adverse events within their organizations. NHSN data collection 
occurs via a Web-based tool hosted by the CDC and provided free of 
charge to facilities. In this proposed rule, we have not proposed to 
adopt any new quality measures that are collected via the CDC's NHSN. 
Therefore, at this time, there is no additional burden related to this 
submission method. Any burden related to NHSN-based quality measures we 
have retained in this proposed rule, has been previously discussed in 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50443 through 50445), and 
has been previously approved under OMB control number 0920-0666, with 
an expiration date of November, 31, 2016.
    The All-Cause Unplanned Readmission Measure for 30 Days Post-
Discharge From LTCHs (NQF #2512), which we have proposed in this 
proposed rule, is a Medicare FFS claims-based measure. Because claims-
based measures can be calculated based on data that are already 
reported to the Medicare program for payment purposes, we believe no 
additional information collection will be required from the LTCHs.
    The remaining 6 measures will be collected utilizing the LTCH CARE 
Data Set (LCDS). The LCDS, in its current form (version 2.0), has been 
approved under OMB control number 0938-1163. Version 2.0 of the LCDS 
contains data elements related to patient demographic data, various 
voluntary questions, as well as data elements related to the following 
quality measures:

 Percent of Residents or Patients with Pressure Ulcers That Are 
New or Worsened (Short Stay) (NQF #0678)
 Percent of Residents or Patients Who Were Assessed and 
Appropriately Given the Seasonal Influenza Vaccine (Short Stay) (NQF 
#0680)

    Version 3.0 of the LCDS is under development and will contain those 
data elements included in version 2.0, as well as additional data 
elements in order to allow for the collection of data associated with 
the following quality measures:

 Application of Percent of Residents Experiencing One or More 
Falls with Major Injury (Long Stay) (NQF #0674) (previously finalized 
in the FY 2015 IPPS/LTCH PPS final rule)
 Application of Percent of Long-Term Care Hospital Patients 
with an Admission and Discharge Functional Assessment and a Care Plan 
That Addresses Function (NQF # 2631--under NQF review) (previously 
finalized in the FY 2015 IPPS/LTCH PPS final rule)
 Functional Status Outcome Measure: Change in Mobility Among 
Long-Term Care Hospital Patients Requiring Ventilator Support (NQF 
#2632--under NQF review) (previously finalized in the FY 2015 IPPS/LTCH 
PPS final rule)

    Each time we add new data elements to the LCDS related to newly 
proposed or finalized LTCH QRP quality measures, we are required by the 
PRA to submit the expanded data collection instrument to OMB for review 
and

[[Page 24621]]

approval. Section 1899B(m) of the Act, as added by IMPACT Act of 2014, 
provides that the PRA requirements do not apply to section 1899B of the 
Act and the sections referenced in subsection 1899B(a)(2)(B) of the Act 
that require modifications in order to achieve the standardization of 
patient assessment data. We believe that version 3.0 of the LTCH CARE 
Data Set falls under the PRA provisions in 1899B(m) of the Act. We 
believe that all additional data elements added to version 3.0 of the 
LCDS are for the purpose of standardizing patient assessment data, as 
required under section 1899B(a)(1)(B) of the Act.
    A comprehensive list of all data elements included in version 3.0 
of the LCDS is available in the LTCH QRP Manual, as is a crosswalk 
outlining the differences between version 2.0 and 3.0 of the LCDS. The 
Manual accessible on the following LTCH Quality Reporting Measures 
Information Web page: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/LTCH-Quality-Reporting/LTCH-Quality-Reporting-Measures-Information.html. For a discussion of burden related 
to version 3.0 of the LCDS, we refer readers to section I.M. of 
Appendix A of this proposed rule.
    While the reporting of quality measures is an information 
collection, the PRA does not apply in accordance with the amendments to 
the Act made by IMPACT Act of 2014. More specifically, section 1899B(m) 
of the Act provides that the PRA requirements do not apply to section 
1899B of the Act and the sections referenced in subsection 
1899B(a)(2)(B) of the Act that require modifications in order to 
achieve the standardization of patient assessment data.
10. ICRs for the Electronic Health Record (EHR) Incentive Program and 
Meaningful Use
    In section VIII.D. of the preamble of this proposed rule, we 
discuss our proposals to align the Medicare EHR Incentive Program 
reporting and submission timelines for electronically submitted 
clinical quality measures for eligible hospitals and CAHs with the 
Hospital IQR Program's reporting and submission timelines for 2016. 
Because these proposals for data collection would align with the 
reporting requirements in place for the Hospital IQR Program and 
eligible hospitals and CAHs still have the option to submit their 
clinical quality measures via attestation for the Medicare EHR 
Incentive Program, we do not believe there is any additional burden for 
this collection of information.
    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
CMS-1632-P; Fax: (202) 395-6974; or Email: [email protected].

C. Response to Public Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all public comments we 
receive by the date and time specified in the DATES section of this 
preamble, and, when we proceed with a subsequent document, we will 
respond to the public comments in the preamble of that document.

List of Subjects

42 CFR Part 412

    Administrative practice and procedure, Health facilities, Medicare, 
Puerto Rico, Reporting and recordkeeping requirements.

45 CFR Part 170

    Computer technology, Electronic health record, Electronic 
information system, Electronic transactions, Health, Health care, 
Health information technology, Health insurance, Health records, 
Hospitals, Incorporation by reference, Laboratories, Medicaid, 
Medicare, Privacy, Reporting and recordkeeping requirements, Public 
Health, Security.

    For the reasons stated in the preamble, the Centers for Medicare & 
Medicaid Services proposes to amend 42 CFR chapter IV as set forth 
below:

Title 42--Public Health

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

0
1. The authority citation for part 412 continues to read as follows:

    Authority:  Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh), sec. 124 of Pub. L. 106-113 (113 Stat. 
1501A-332), sec. 1206 of Public Law 113-67, and sec. 112 of Public 
Law 113-93.
0
2. Section 412.23 is amended by--
0
a. In paragraph (e)(3)(i), removing the cross-reference ``paragraphs 
(e)(3)(ii) through (iv)'' wherever it appears and adding in its place 
the cross-reference ``paragraphs (e)(3)(ii) through (vi)''.
0
b. Adding new paragraph (e)(3)(vi).
0
c. Revising paragraph (e)(6)(ii) introductory text.
    The addition and revision reads as follows:


Sec.  412.23  Excluded hospitals: Classifications.

* * * * *
    (e) * * *
    (3) * * *
    (vi) For cost reporting periods beginning on or after October 1, 
2015, the Medicare inpatient days and discharges that are paid at the 
site neutral payment rate specified at Sec.  412.522(c)(1) or paid 
under a Medicare Advantage plan (Medicare Part C) will not be included 
in the calculation of the Medicare inpatient average length of stay 
specified under paragraph (e)(2)(i) of this section. The provisions of 
this paragraph (e)(3)(vi) do not apply to a hospital classified as a 
subsection (d) hospital (as defined in section 1886(d)(1)(B) the Act) 
as of December 10, 2013.
* * * * *
    (6) * * *
    (ii) Exception. The moratorium specified in paragraph (e)(6)(i) of 
this section is not applicable to the establishment and classification 
of a long-term care hospital that meets the requirements of paragraphs 
(e) introductory text and (e)(1) through (5) of this section, or a 
long-term care hospital satellite facility that meets the requirements 
of Sec.  412.22(h), if the long-term care hospital or long-term care 
satellite facility meets one or more of the following criteria on or 
before December 27, 2007, or prior to April 1, 2014, as applicable:
* * * * *
0
3. Section 412.64 is amended by revising paragraphs (d)(1)(vi), (h)(4) 
introductory text, and (h)(4)(vi) introductory text, to read as 
follows:


Sec.  412.64  Federal rates for inpatient operating costs for Federal 
fiscal year 2005 and subsequent fiscal years.

* * * * *
    (d) * * *
    (1) * * *
    (vi) For fiscal years 2015 and 2016, the percentage increase in the 
market basket index (as defined in Sec.  413.40(a)(3) of this chapter) 
for prospective payment hospitals, subject to the provisions of 
paragraphs (d)(2) and (3) of this section, less a multifactor 
productivity adjustment (as determined by CMS) and less 0.2 percentage 
point.
* * * * *
    (h) * * *
    (4) For discharges on or after October 1, 2004 and before October 
1, 2016,

[[Page 24622]]

CMS establishes a minimum wage index for each all-urban State, as 
defined in paragraph (h)(5) of this section. This minimum wage index 
value is computed using the following methodology:
* * * * *
    (vi) For discharges on or after October 1, 2012 and before October 
1, 2016, the minimum wage index value for the State is the higher of 
the value determined under paragraph (h)(4)(iv) of this section or the 
value computed using the following alternative methodology:
* * * * *
0
4. Section 412.106 is amended by revising paragraph (g)(1)(iii)(C) to 
read as follows:


Sec.  412.106  Special treatment: Hospitals that serve a 
disproportionate share of low-income patients.

* * * * *
    (g) * * *
    (1) * * *
    (iii) * * *
    (C) For fiscal years 2014 and 2015, CMS will base its estimates of 
the amount of hospital uncompensated care on the most recent available 
data on utilization for Medicaid and Medicare SSI patients, as 
determined by CMS in accordance with paragraphs (b)(2)(i) and (b)(4) of 
this section. For fiscal year 2016, CMS will base its estimates of the 
amount of hospital uncompensated care on utilization data for Medicaid 
and Medicare SSI patients, as determined by CMS in accordance with 
paragraphs (b)(2)(i) and (b)(4) of this section, using data on Medicaid 
utilization from 2012 or 2011 cost reports from the most recent HCRIS 
database extract, the 2012 cost report data submitted to CMS by IHS 
hospitals, and the most recent available data on Medicare SSI 
utilization.
* * * * *
0
5. Section 412.302 is amended by revising paragraph (d)(4) to read as 
follows:


Sec.  412.302  Introduction to capital costs.

* * * * *
    (d) * * *
    (4) For cost reporting periods beginning before October 1, 2015, 
hospitals may elect the simplified cost allocation methodology under 
the terms and conditions provided in the instructions for CMS Form 
2552.
0
6. Section 412.503 is amended by adding a definition of ``Subsection 
(d) hospital'' in alphabetical order, to read as follows:


Sec.  412.503  Definitions.

* * * * *
    Subsection (d) hospital means, for purposes of Sec.  412.526, a 
hospital defined in section 1886(d)(1)(B) of the Social Security Act 
and includes any hospital that is located in Puerto Rico and that would 
be a subsection (d) hospital as defined in section 1886(d)(1)(B) of the 
Social Security Act if it were located in one of the 50 States.
* * * * *
0
7. Section 412.507 is revised to read as follows:


Sec.  412.507  Limitation on charges to beneficiaries.

    (a) Prohibited charges. Except as provided in paragraph (b) of this 
section, a long-term care hospital may not charge a beneficiary for any 
covered services for which payment is made by Medicare, even if the 
hospital's costs of furnishing services to that beneficiary are greater 
than the amount the hospital is paid under the prospective payment 
system. If Medicare has paid at the full LTCH prospective payment 
system standard Federal payment rate, that payment applies to the 
hospital's costs for services furnished until the high-cost outlier 
threshold is met. If Medicare pays less than the full LTCH prospective 
payment system standard Federal payment rate and payment was not made 
at the site neutral payment rate, that payment only applies to the 
hospital's costs for those costs or days used to calculate the Medicare 
payment. If Medicare has paid at the full site neutral payment rate, 
that payment applies to the hospital's costs for services furnished 
until the high-cost outlier is met.
    (b) Permitted charges. (1) A long-term care hospital that receives 
a payment at the full LTCH prospective payment system standard Federal 
payment rate or the site neutral payment rate may only charge the 
Medicare beneficiary for the applicable deductible and coinsurance 
amounts under Sec. Sec.  409.82, 409.83, and 409.87 of this chapter, 
and for items and services as specified under Sec.  489.20(a) of this 
chapter.
    (2) A long-term care hospital that receives a payment at less than 
the full LTCH prospective payment system standard Federal payment rate 
for a short-stay outlier case, in accordance with Sec.  412.529 (which 
would not include any discharge paid at the site neutral payment rate), 
may only charge the Medicare beneficiary for the applicable deductible 
and coinsurance amounts under Sec. Sec.  409.82, 409.83, and 409.87 of 
this chapter, for items and services as specified under Sec.  489.20(a) 
of this chapter, and for services provided during the stay that were 
not the basis for the short-stay adjusted payment.
0
8. Section 412.517 is amended by adding a new paragraph (c) to read as 
follows:


Sec.  412.517  Revision of LTC-DRG group classifications and weighting 
factors.

* * * * *
    (c) Beginning in FY 2016, the annual recalibration of the weighting 
factors described in paragraph (a) of this section is determined using 
long-term care hospital discharges described in Sec.  412.522(a)(2).
0
9. Section 412.521 is amended by revising paragraph (a)(2) to read as 
follows:


Sec.  412.521  Basis of payment.

    (a) * * *
    (2) Except as provided for in Sec.  412.526, the amount of payment 
under the prospective payment system is based on either the long-term 
care hospital prospective payment system standard Federal payment rate 
established in accordance with Sec.  412.523, including adjustments 
described in Sec.  412.525, or the site neutral payment rate 
established in accordance with Sec.  412.522(c), or, if applicable 
during a transition period, the blend of the LTCH PPS standard Federal 
payment rate and the applicable site neutral payment rate described in 
Sec.  412.522(c)(3).
* * * * *
0
10. A new Sec.  412.522 is added to read as follows:


Sec.  412.522  Application of site neutral payment rate.

    (a) General. For discharges in cost reporting periods beginning on 
or after October 1, 2015--
    (1) Except as provided for in paragraph (b) of this section, all 
discharges are paid based on the site neutral payment rate as 
determined under the provisions of paragraph (c) of this section.
    (2) Discharges that meet the criteria for exclusion from site 
neutral payment rate specified in paragraph (b) of this section are 
paid based on the standard Federal prospective payment rate established 
under Sec.  412.523.
    (b) Criteria for exclusion from the site neutral payment rate--(1) 
General. A discharge that meets the following criteria is excluded from 
the site neutral payment rate specified under this section.
    (i) The discharge from the long-term care hospital does not have a 
principal diagnosis relating to a psychiatric diagnosis or to 
rehabilitation based on the LTC-DRG assignment of the discharge under 
Sec.  412.513; and

[[Page 24623]]

    (ii) The admission to the long-term care hospital was immediately 
preceded by a discharge from a subsection (d) hospital and meets either 
the intensive care unit criterion specified in paragraph (b)(2) of this 
section or the ventilator criterion specified in paragraph (b)(3) of 
this section. In order for an admission to a long-term care hospital to 
be considered immediately preceded for purposes of this section, the 
patient discharged from the subsection (d) hospital must be directly 
admitted to the long-term care hospital.
    (2) Intensive care unit criterion. In addition to meeting the 
requirements of paragraph (b)(1) of this section, the discharge from 
the subsection (d) hospital that immediately preceded the admission to 
the long-term care hospital includes at least 3 days in an intensive 
care unit (as defined in Sec.  413.53(d) of this chapter), as evidenced 
by at least one of the revenue center codes on the claim for the 
discharge that indicate such services were provided for the requisite 
number of days during the stay.
    (3) Ventilator criterion. In addition to meeting the requirements 
of paragraph (b)(1) of this section, the discharge from the long-term 
care hospital is assigned to a LTC-DRG based on the patient's receipt 
of ventilator services of at least 96 hours, as evidenced by the 
procedure code on the discharge bill indicating such services were 
provided during the stay.
    (c) Site neutral payment rate--(1) General. Subject to the 
provisions of paragraph (c)(2) of this section, the site neutral 
payment rate is the lower of--
    (i) The inpatient hospital prospective payment system comparable 
per diem amount determined under Sec.  412.529(d)(4), including any 
applicable outlier payments specified in Sec.  412.525(a); or
    (ii) 100 percent of the estimated cost of the case determined under 
the provisions of Sec.  412.529(d)(2). The provisions for cost- to-
charge ratios at Sec.  412.529(f)(4)(i) through (iii) apply to the 
calculation of the estimated cost of the case under this paragraph.
    (2) Adjustments. CMS adjusts the payment rate determined under 
paragraph (c)(1) of this section to account for--
    (i) Outlier payments, by applying a reduction factor equal to the 
estimated proportion of outlier payments under Sec.  412.525(a) payable 
for discharges from a long-term care hospital described in paragraph 
(a)(1) of this section to total estimated payments under the long-term 
care hospital prospective payment system to discharges from a long-term 
care hospital described in paragraph (a)(1) of this section.
    (ii) A 3-day or less interruption of a stay and a greater than 3-
day interruption of a stay, as provided for in Sec.  412.531. For 
purposes of the application of the provisions of Sec.  412.531 to 
discharges from a long-term care hospital described under paragraph 
(a)(1) of this section, the long-term care hospital prospective payment 
system standard Federal payment-related terms, such as ``LTC-DRG 
payment,'' ``full Federal LTC-DRG prospective payment,'' and ``Federal 
prospective payment,'' mean the site neutral payment rate calculated 
under paragraph (c) of this section.
    (iii) The special payment provisions for long-term care hospitals-
within-hospitals and satellite facilities of long-term care hospitals 
specified in Sec.  412.534.
    (iv) The special payment provisions for long-term care hospitals 
and satellite facilities of long-term care hospitals that discharged 
Medicare patients admitted from a hospital not located in the same 
building or on the same campus as the long-term care hospital or 
satellite facility of the long-term care hospital, as provided in Sec.  
412.536.
    (3) Transition. For discharges in cost reporting periods beginning 
on or after October 1, 2015 and on or before September 30, 2017, 
payment for discharges under paragraph (c)(1) of this section are made 
using a blended payment rate, which is determined as--
    (i) 50 percent of the site neutral payment rate amount for the 
discharge as determined under paragraph (c)(1) of this section; and
    (ii) 50 percent of the standard Federal prospective payment rate 
amount for the discharge as determined under Sec.  412.523.
    (4) Reconciliation of payments under the site neutral payment rate. 
Payments under paragraph (c) of this section are reconciled in 
accordance with the following provisions:
    (i) Any reconciliation of payments under the site neutral payment 
rate is based on the cost-to-charge ratio calculated based on a ratio 
of costs to charges computed from the relevant cost report and charge 
data determined at the time the cost report coinciding with the 
discharge is settled.
    (ii) At the time of any reconciliation under paragraph (c)(4)(i) of 
this section, payments under the site neutral payment rate may be 
adjusted to account for the time value of any underpayments or 
overpayments. Any adjustment is based upon a widely available index to 
be established in advance by the Secretary, and is applied from the 
midpoint of the cost reporting period to the date of reconciliation.
    (d) Discharge payment percentage. (1) For purposes of this section, 
the discharge payment percentage is a ratio, expressed as a percentage, 
of Medicare discharges that meet the criteria for exclusion from the 
site neutral payment rate as described under paragraph (a)(2) of this 
section to total Medicare discharges paid under this Subpart O during 
the cost reporting period.
    (2) CMS will inform each long-term care hospital of its discharge 
payment percentage, as determined under paragraph (d)(1) of this 
section, for each cost reporting period beginning on or after October 
1, 2015.
0
11. Section 412.523 is amended by adding a new paragraph (c)(3)(xii) 
and revising paragraph (d)(1) to read as follows:


Sec.  412.523  Methodology for calculating the Federal prospective 
payment rates.

* * * * *
    (c) * * *
    (3) * * *
    (xii) For long-term care hospital prospective payment system fiscal 
year beginning October 1, 2015, and ending September 30, 2016. The LTCH 
PPS standard Federal payment rate for the long-term care hospital 
prospective payment system beginning October 1, 2015, and ending 
September 30, 2016, is the standard Federal payment rate for the 
previous long-term care hospital prospective payment system fiscal year 
updated by 1.9 percent, and further adjusted, as appropriate, as 
described in paragraph (d) of this section.
* * * * *
    (d) * * *
    (1) Outlier payments. CMS adjusts the LTCH PPS standard Federal 
payment rate by a reduction factor of 8 percent, the estimated 
proportion of outlier payments under Sec.  412.525(a) payable for 
discharges described in Sec.  412.522(a)(2).
* * * * *
0
12. Section 412.525 is amended by revising paragraphs (a)(1), (2), and 
(3) and adding a new paragraph (a)(5), to read as follows:


Sec.  412.525  Adjustments to the Federal prospective payment.

    (a) * * *
    (1) CMS provides for an additional payment to a long-term care 
hospital if its estimated costs for a patient exceed the applicable 
long-term care hospital prospective payment system payment plus an 
applicable fixed-loss amount. For each long-term care hospital 
prospective payment system payment year, CMS annually establishes a 
fixed-loss amount that is the maximum loss

[[Page 24624]]

that a long-term care hospital would incur under the applicable 
prospective payment system rate for a case with unusually high costs 
before receiving an additional payment.
    (2) The fixed-loss amount for discharges from a long-term care 
hospital described under Sec.  412.522(a)(2) is determined for the 
long-term care hospital prospective payment system payment year, using 
the LTC-DRG relative weights that are in effect at the start of the 
applicable long-term care hospital prospective payment system payment 
year.
    (3) The additional payment equals 80 percent of the difference 
between the estimated cost of the patient's care (determined by 
multiplying the hospital-specific cost-to-charge ratio by the Medicare 
allowable covered charge) and the sum of the applicable long-term care 
hospital prospective payment system payment and the applicable fixed-
loss amount.
* * * * *
    (5) For purposes of this paragraph (a)--
    (i) Applicable long-term care hospital prospective payment system 
payment means:
    (A) The site neutral payment rate established under Sec.  
412.522(c) for long-term care hospital discharges described under Sec.  
412.522(a)(1); or
    (B) The standard Federal prospective payment rates established 
under Sec.  412.523 for long-term care hospital discharges described 
under Sec.  412.522(a)(2).
    (ii) Applicable fixed-loss amount means:
    (A) For long-term care hospital discharges described under Sec.  
412.522(a)(1), the fixed-loss amount established for such cases as 
provided at Sec.  412.522(c)(2)(i).
    (B) For long-term care hospital discharges described under Sec.  
412.522(a)(2), the fixed-loss amount established for such cases as 
provided at Sec.  412.523(e).
* * * * *
0
13. A new Sec.  412.560 is added to read as follows:


Sec.  412.560  Participation, data submission, and other requirements 
under the Long-Term Care Hospital Quality Reporting (LTCHQR) Program.

    (a) Participation in the LTCHQR Program. A long-term-care hospital 
must begin submitting quality data under the LTCHQR Program by no later 
than the first day of the calendar quarter subsequent to 30 days after 
the date on its CMS Certification Number (CCN) notification letter.
    (b) Submission of data requirements and payment impact. (1) Except 
as provided in paragraph (c) of this section, a long-term care hospital 
must submit to CMS data on measures specified under sections 
1886(m)(5)(D), 1899B(c)(1), and 1899B(d)(1) of the Act, as applicable, 
in a form and manner, and at a time, specified by CMS.
    (2) A long-term care hospital that does not submit data in 
accordance with sections 1886(m)(5)(C) and 1886(m)(5)(F) of the Act 
with respect to a given fiscal year will have its annual update to the 
standard Federal rate for discharges for the long-term care hospital 
during the fiscal year reduced by 2 percentage points.
    (c) Exception and extension request requirements. Upon request by a 
long-term care hospital, CMS may grant an exception or extension with 
respect to the quality data reporting requirements, for one or more 
quarters, in the event of certain extraordinary circumstances beyond 
the control of the long-term care hospital, subject to the following:
    (1) A long-term care hospital that wishes to request an exception 
or extension with respect to quality data reporting requirements must 
submit its request to CMS within 30 days of the date that the 
extraordinary circumstances occurred.
    (2) A long-term care hospital must submit its request for an 
exception or extension to CMS via email. Email is the only form that 
may be used to submit to CMS a request for an exception or an 
extension.
    (3) The email request for an exception or extension must contain 
the following information:
    (i) The CCN for the long-term care hospital.
    (ii) The business name of the long-term care hospital.
    (iii) The business address of the long-term care hospital.
    (iv) Contact information for the long-term care hospital's chief 
executive officer or designated personnel, including the name, 
telephone number, title, email address, and physical mailing address. 
(The mailing address may not be a post office box.)
    (v) A statement of the reason for the request for the exception or 
extension.
    (vi) Evidence of the impact of the extraordinary circumstances, 
including, but not limited to, photographs, newspaper articles, and 
other media.
    (vii) The date on which the long-term care hospital will be able to 
again submit quality data under the LTCHQR Program and a justification 
for the proposed date.
    (4) CMS may grant an exception or extension to a long-term care 
hospital that has not been requested by the long-term care hospital if 
CMS determines that--
    (i) An extraordinary circumstance affects an entire region or 
locale; or
    (ii) A systemic problem with one of CMS' data collection systems 
directly affected the ability of the long-term care hospital to submit 
quality data.
    (d) Reconsiderations of noncompliance decisions--(1) Written 
notification of noncompliance decision. CMS will send a long-term care 
hospital written notification of a decision of noncompliance with the 
quality data reporting requirements for a particular fiscal year. CMS 
also will use the Quality Improvement and Evaluation system (QIES) 
Assessment Submission and Processing (ASAP) System to provide 
notification of noncompliance to the long-term care hospital.
    (2) Request for reconsideration of noncompliance decision. A long-
term care hospital may request a reconsideration of CMS' decision of 
noncompliance no later than 30 calendar days from the date of the 
written notification of noncompliance. The reconsideration request by 
the long-term care hospital must be submitted to CMS via email and must 
contain the following information:
    (i) The CCN for the long-term care hospital.
    (ii) The business name of the long-term care hospital.
    (iii) The business address of the long-term care hospital.
    (iv) Contact information for the long-term care hospital's chief 
executive officer or designated personnel, including each individual's 
name, title, email address, telephone number, and physical mailing 
address. (The physical address may not be a post office box.)
    (v) CMS's identified reason(s) for the noncompliance decision from 
the written notification of noncompliance.
    (vi) The reason for requesting reconsideration of CMS' 
noncompliance decision.
    (vii) Accompanying documentation that demonstrates compliance of 
the long-term care hospital with the quality reporting requirements. 
This documentation must be submitted electronically at the same time as 
the reconsideration request as an attachment to the email. Any 
reconsideration request that fails to provide sufficient evidence of 
compliance will not be reviewed.
    (3) CMS decision on reconsideration request. CMS will notify the 
long-term care hospital, in writing, of its final decision regarding 
any reconsideration request. CMS also will use the QIES ASAP System to 
provide notice of its

[[Page 24625]]

final decision on the reconsideration request.
    (e) Appeals of reconsideration requests. A long-term care hospital 
that is dissatisfied with a decision made by CMS on its reconsideration 
request may file an appeal with the Provider Reimbursement Review Board 
under part 405, subpart R, of this chapter.
    For the reasons stated in the preamble, the Department of Health 
and Human Services proposes to further amend 45 CFR part 170 as 
previously proposed to be amended on March 30, 2015 (80 FR 16902) as 
follows:

Title 45--Public Welfare

PART 170--HEALTH INFORMATION TECHNOLOGY STANDARDS, IMPLEMENTATION 
SPECIFICATIONS, AND CERTIFICATION CRITERIA AND CERTIFICATION 
PROGRAMS FOR HEALTH INFORMATION TECHNOLOGY

0
14. The authority citation for part 170 continues to read as follows:

    Authority:  42 U.S.C. 300jj-11; 42 U.S.C.300jj-14; 5 U.S.C. 552.

0
15. Section 170.315 as proposed to be added on March 30, 2015 (80 FR 
16905) is amended by adding paragraph (c)(3) to read as follows:


Sec.  170.315  2015 Edition health IT certification criteria.

* * * * *
    (c) * * *
    (3) Clinical quality measures--report. Enable a user to 
electronically create a data file for transmission of clinical quality 
measurement data:
    (i) Mandatory. At a minimum, in accordance with the standards 
specified in Sec.  170.205(h) and Sec.  170.205(k) of this chapter; and
    (ii) Optional. That can be electronically accepted by CMS.
* * * * *

    Dated: April 13, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: April 15, 2015.
Sylvia M. Burwell,
Secretary, Department of Health and Human Services.

    Note:  The following Addendum and Appendixes will not appear in 
the Code of Federal Regulations.

Addendum--Proposed Schedule of Standardized Amounts, Update Factors, 
Rate-of-Increase Percentages Effective With Cost Reporting Periods 
Beginning on or After October 1, 2015, and Payment Rates for LTCHs 
Effective for Discharges Occurring on or After October 1, 2015

I. Summary and Background

    In this Addendum, we are setting forth a description of the 
methods and data we used to determine the proposed prospective 
payment rates for Medicare hospital inpatient operating costs and 
Medicare hospital inpatient capital-related costs for FY 2016 for 
acute care hospitals. We also are setting forth the rate-of-increase 
percentage for updating the target amounts for certain hospitals 
excluded from the IPPS for FY 2016. We note that, because certain 
hospitals excluded from the IPPS are paid on a reasonable cost basis 
subject to a rate-of-increase ceiling (and not by the IPPS), these 
hospitals are not affected by the proposed figures for the 
standardized amounts, offsets, and budget neutrality factors. 
Therefore, in this proposed rule, we are setting forth the rate-of-
increase percentage for updating the target amounts for certain 
hospitals excluded from the IPPS that are effective for cost 
reporting periods beginning on or after October 1, 2015.
    In addition, we are setting forth a description of the methods 
and data we used to determine the proposed standard Federal rate 
that would be applicable to Medicare LTCHs for FY 2016.
    In general, except for SCHs and hospitals located in Puerto 
Rico, for FY 2016, each hospital's payment per discharge under the 
IPPS is based on 100 percent of the Federal national rate, also 
known as the national adjusted standardized amount. This amount 
reflects the national average hospital cost per case from a base 
year, updated for inflation.
    SCHs are paid based on whichever of the following rates yields 
the greatest aggregate payment: The Federal national rate 
(including, as discussed in section IV.D. of the preamble of this 
proposed rule, uncompensated care payments under section 1886(r)(2) 
of the Act); the updated hospital-specific rate based on FY 1982 
costs per discharge; the updated hospital-specific rate based on FY 
1987 costs per discharge; the updated hospital-specific rate based 
on FY 1996 costs per discharge; or the updated hospital-specific 
rate based on FY 2006 costs per discharge.
    We note that the MDH program expired for discharges beginning on 
April 1, 2015 under current law.
    For hospitals located in Puerto Rico, the payment per discharge 
is based on the sum of 25 percent of an updated Puerto Rico-specific 
rate based on average costs per case of Puerto Rico hospitals for 
the base year and 75 percent of the Federal national rate. (We refer 
readers to section II.D.2. of this Addendum for a complete 
description.)
    As discussed in section II. of this Addendum, we are proposing 
to make changes in the determination of the prospective payment 
rates for Medicare inpatient operating costs for acute care 
hospitals for FY 2016. In section III. of this Addendum, we discuss 
our proposed policy changes for determining the prospective payment 
rates for Medicare inpatient capital-related costs for FY 2016. In 
section IV. of this Addendum, we are setting forth the rate-of-
increase percentage for determining the rate-of-increase limits for 
certain hospitals excluded from the IPPS for FY 2016. In section V. 
of this Addendum, we discuss proposed policy changes for determining 
the standard Federal rate for LTCHs paid under the LTCH PPS for FY 
2016. The tables to which we refer in the preamble of this proposed 
rule are listed in section VI. of this Addendum and are available 
via the Internet on the CMS Web site.

II. Proposed Changes to Prospective Payment Rates for Hospital 
Inpatient Operating Costs for Acute Care Hospitals for FY 2016

    The basic methodology for determining prospective payment rates 
for hospital inpatient operating costs for acute care hospitals for 
FY 2005 and subsequent fiscal years is set forth under Sec.  412.64. 
The basic methodology for determining the prospective payment rates 
for hospital inpatient operating costs for hospitals located in 
Puerto Rico for FY 2005 and subsequent fiscal years is set forth 
under Sec. Sec.  412.211 and 412.212. Below we discuss the factors 
we are proposing to use for determining the proposed prospective 
payment rates for FY 2016.
    In summary, the proposed standardized amounts set forth in 
Tables 1A, 1B, and 1C that are listed and published in section VI. 
of this Addendum (and available via the Internet) reflect--
     Equalization of the standardized amounts for urban and 
other areas at the level computed for large urban hospitals during 
FY 2004 and onward, as provided for under section 
1886(d)(3)(A)(iv)(II) of the Act.
     The labor-related share that is applied to the 
standardized amounts and Puerto Rico-specific standardized amounts 
to give the hospital the highest payment, as provided for under 
sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act. For FY 
2016, depending on whether a hospital submits quality data under the 
rules established in accordance with section 1886(b)(3)(B)(viii) of 
the Act (hereafter referred to as a hospital that submits quality 
data) and is a meaningful EHR user under section 1886(b)(3)(B)(ix) 
of the Act (hereafter referred to as a hospital that is a meaningful 
EHR user), there are four possible applicable percentage increases 
that can be applied to the national standardized amount. We refer 
readers to section IV.A. of the preamble of this proposed rule for a 
complete discussion on the proposed FY 2016 inpatient hospital 
update. Below is a table with these four options:

[[Page 24626]]



----------------------------------------------------------------------------------------------------------------
                                                     Hospital        Hospital      Hospital did    Hospital did
                                                     submitted       submitted      NOT submit      NOT submit
                                                   quality data    quality data    quality data    quality data
                     FY 2016                         and is a      and is NOT a      and is a      and is NOT a
                                                    meaningful      meaningful      meaningful      meaningful
                                                     EHR user        EHR user        EHR user        EHR user
----------------------------------------------------------------------------------------------------------------
Proposed market basket                                       2.7             2.7             2.7             2.7
 rate[dash]of[dash]increase.....................
Proposed Adjustment for Failure to Submit                    0.0             0.0          -0.675          -0.675
 Quality Data under Section 1886(b)(3)(B)(viii)
 of the Act.....................................
Proposed Adjustment for Failure to be a                      0.0           -1.35             0.0           -1.35
 Meaningful EHR User under Section
 1886(b)(3)(B)(ix) of the Act...................
Proposed MFP Adjustment under Section                       -0.6            -0.6            -0.6            -0.6
 1886(b)(3)(B)(xi) of the Act...................
Statutory Adjustment under Section                          -0.2            -0.2            -0.2            -0.2
 1886(b)(3)(B)(xii) of the Act..................
Proposed Applicable Percentage Increase Applied              1.9            0.55           1.225          -0.125
 to Standardized Amount.........................
----------------------------------------------------------------------------------------------------------------

     A proposed update of 1.9 percent to the Puerto Rico-
specific standardized amount (that is, the proposed FY 2016 estimate 
of the market basket rate-of-increase of 2.7 percent less a proposed 
adjustment of 0.6 percentage point for MFP and less 0.2 percentage 
point), in accordance with section 1886(d)(9)(C)(i) of the Act, as 
amended by section 401(c) of Public Law 108-173, which sets the 
update to the Puerto Rico-specific standardized amount equal to the 
applicable percentage increase set forth under section 
1886(b)(3)(B)(i) of the Act.
     An adjustment to the standardized amount to ensure 
budget neutrality for DRG recalibration and reclassification, as 
provided for under section 1886(d)(4)(C)(iii) of the Act.
     An adjustment to ensure the wage index changes are 
budget neutral, as provided for under section 1886(d)(3)(E)(i) of 
the Act. We note that section 1886(d)(3)(E)(i) of the Act requires 
that when we compute such budget neutrality, we assume that the 
provisions of section 1886(d)(3)(E)(ii) of the Act (requiring a 62 
percent labor-related share in certain circumstances) had not been 
enacted.
     An adjustment to ensure the effects of geographic 
reclassification are budget neutral, as provided for under section 
1886(d)(8)(D) of the Act, by removing the FY 2015 budget neutrality 
factor and applying a revised factor.
     As discussed below and in section III.G. of the 
preamble of this proposed rule, an adjustment to offset the cost of 
the 3-year hold harmless transitional wage index provisions provided 
by CMS as a result of the implementation of the new OMB labor market 
area delineations (beginning with FY 2015).
     An adjustment to ensure the effects of the rural 
community hospital demonstration program required under section 410A 
of Public Law 108-173, as amended by sections 3123 and 10313 of 
Public Law 111-148, which extended the demonstration program for an 
additional 5 years, are budget neutral as required under section 
410A(c)(2) of Public Law 108-173.
     An adjustment to remove the FY 2015 outlier offset and 
apply an offset for FY 2016, as provided for under section 
1886(d)(3)(B) of the Act.
     As discussed below and in section II.D. of the preamble 
of this proposed rule, a recoupment to meet the requirements of 
section 631 of ATRA to adjust the standardized amount to offset the 
estimated amount of the increase in aggregate payments as a result 
of not completing the prospective adjustment authorized under 
section 7(b)(1)(A) of Public Law 110-90 until FY 2013.
    For FY 2016, consistent with current law, we are applying the 
rural floor budget neutrality adjustment to hospital wage indexes. 
Also, consistent with section 3141 of the Affordable Care Act, 
instead of applying a State level rural floor budget neutrality 
adjustment to the wage index, we are applying a uniform, national 
budget neutrality adjustment to the FY 2016 wage index for the rural 
floor. We note that, in section III.G.2.b. of the preamble to this 
proposed rule, we are proposing to extend the imputed floor policy 
(both the original methodology and alternative methodology) for 
another year, through September 30, 2016. Therefore, for FY 2016, in 
this proposed rule, we are proposing to continue to include the 
imputed floor (calculated under the original and alternative 
methodologies) in calculating the uniform, national rural floor 
budget neutrality adjustment, which would be reflected in the FY 
2016 wage index.

A. Calculation of the Proposed Adjusted Standardized Amount

1. Standardization of Base-Year Costs or Target Amounts

    In general, the national standardized amount is based on per 
discharge averages of adjusted hospital costs from a base period 
(section 1886(d)(2)(A) of the Act), updated and otherwise adjusted 
in accordance with the provisions of section 1886(d) of the Act. For 
Puerto Rico hospitals, the Puerto Rico-specific standardized amount 
is based on per discharge averages of adjusted target amounts from a 
base period (section 1886(d)(9)(B)(i) of the Act), updated and 
otherwise adjusted in accordance with the provisions of section 
1886(d)(9) of the Act. The September 1, 1983 interim final rule (48 
FR 39763) contained a detailed explanation of how base-year cost 
data (from cost reporting periods ending during FY 1981) were 
established for urban and rural hospitals in the initial development 
of standardized amounts for the IPPS. The September 1, 1987 final 
rule (52 FR 33043 and 33066) contains a detailed explanation of how 
the target amounts were determined and how they are used in 
computing the Puerto Rico rates.
    Sections 1886(d)(2)(B) and 1886(d)(2)(C) of the Act requires us 
to update base-year per discharge costs for FY 1984 and then 
standardize the cost data in order to remove the effects of certain 
sources of cost variations among hospitals. These effects include 
case-mix, differences in area wage levels, cost-of-living 
adjustments for Alaska and Hawaii, IME costs, and costs to hospitals 
serving a disproportionate share of low-income patients.
    For FY 2016, we are proposing to continue to use the national 
and Puerto Rico-specific labor-related and nonlabor-related shares 
(which are based on the FY 2010-based hospital market basket) that 
were used in FY 2015. Specifically, under section 1886(d)(3)(E) of 
the Act, the Secretary estimates, from time to time, the proportion 
of payments that are labor-related and adjusts the proportion (as 
estimated by the Secretary from time to time) of hospitals' costs 
which are attributable to wages and wage-related costs of the DRG 
prospective payment rates. We refer to the proportion of hospitals' 
costs that are attributable to wages and wage-related costs as the 
``labor-related share.'' For FY 2016, as discussed in section III. 
of the preamble of this proposed rule, we are proposing to continue 
to use a labor-related share of 69.6 percent for the national 
standardized amounts, and 63.2 percent for the Puerto Rico-specific 
standardized amount, if the hospital has a wage index value that is 
greater than 1.0000. Consistent with section 1886(d)(3)(E) of the 
Act, we are proposing to apply the wage index to a labor-related 
share of 62 percent of the national standardized amount for all IPPS 
hospitals whose wage index values are less than or equal to 1.0000. 
For all IPPS hospitals whose wage indexes are greater than 1.0000, 
we are proposing to apply the wage index to a labor-related share of 
69.6 percent of the national standardized amount.
    For FY 2016, all Puerto Rico hospitals have a proposed wage 
index value that is less than 1.0000 because the proposed average 
hourly rate of every hospital in Puerto Rico divided by the proposed 
national average hourly rate (the sum of all salaries and hours for 
all hospitals in the 50 United States and Puerto Rico) results in a 
wage index that is below 1.0000. However, when we divide the 
proposed average hourly rate of every hospital located in Puerto 
Rico by the proposed Puerto Rico-specific national average hourly 
rate (the sum of all salaries and hours for all hospitals located 
only in Puerto Rico), the result is a proposed Puerto Rico-specific 
wage index value for some hospitals that is either above, or below

[[Page 24627]]

1.0000, depending on the hospital's location within Puerto Rico. 
Therefore, for hospitals located in Puerto Rico, we are proposing to 
apply a labor-related share of 63.2 percent if its Puerto Rico-
specific wage index is greater than 1.0000. For hospitals located in 
Puerto Rico whose Puerto Rico-specific wage index values are less 
than or equal to 1.0000, we are proposing to apply a labor share of 
62 percent.
    The proposed standardized amounts for operating costs appear in 
Tables 1A, 1B, and 1C that are listed and published in section VI. 
of the Addendum to this proposed rule and are available via the 
Internet on the CMS Web site.

2. Computing the National Average Standardized Amount and Puerto Rico-
Specific Standardized Amount

    Section 1886(d)(3)(A)(iv)(II) of the Act requires that, 
beginning with FY 2004 and thereafter, an equal standardized amount 
be computed for all hospitals at the level computed for large urban 
hospitals during FY 2003, updated by the applicable percentage 
update. Section 1886(d)(9)(A)(ii)(II) of the Act equalizes the 
Puerto Rico-specific urban and rural area rates. Accordingly, we are 
proposing to calculate the FY 2016 national average standardized 
amount and Puerto Rico-specific standardized amount irrespective of 
whether a hospital is located in an urban or rural location.

3. Updating the National Average Standardized Amount and Puerto Rico-
Specific Standardized Amount

    Section 1886(b)(3)(B) of the Act specifies the applicable 
percentage increase used to update the standardized amount for 
payment for inpatient hospital operating costs. We note that, in 
compliance with section 404 of the MMA, in this proposed rule, we 
are proposing to use the revised and rebased FY 2010-based IPPS 
operating and capital market baskets for FY 2016 (which replaced the 
FY 2006-based IPPS operating and capital market baskets in FY 2014). 
As discussed in section IV.A. of the preamble of this proposed rule, 
in accordance with section 1886(b)(3)(B) of the Act, as amended by 
section 3401(a) of the Affordable Care Act, we are proposing to 
reduce the FY 2016 applicable percentage increase (which is based on 
IHS Global Insight, Inc.'s (IGI's) first quarter 2015 forecast of 
the FY 2010-based IPPS market basket) by the MFP adjustment (the 10-
year moving average of MFP for the period ending FY 2016) of 0.6 
percentage point, which is calculated based on IGI's first quarter 
2015 forecast.
    In addition, in accordance with section 1886(b)(3)(B)(i) of the 
Act, as amended by sections 3401(a) and 10319(a) of the Affordable 
Care Act, we are proposing to further update the standardized amount 
for FY 2016 by the estimated market basket percentage increase less 
0.2 percentage point for hospitals in all areas. Sections 
1886(b)(3)(B)(xi) and (xii) of the Act, as added and amended by 
sections 3401(a) and 10319(a) of the Affordable Care Act, further 
state that these adjustments may result in the applicable percentage 
increase being less than zero. The percentage increase in the market 
basket reflects the average change in the price of goods and 
services comprising routine, ancillary, and special care unit 
hospital inpatient services.
    Based on IGI's 2015 first quarter forecast of the hospital 
market basket increase (as discussed in Appendix B of this proposed 
rule), the most recent forecast of the hospital market basket 
increase for FY 2016 is 2.7 percent. As discussed above, for FY 
2016, depending on whether a hospital submits quality data under the 
rules established in accordance with section 1886(b)(3)(B)(viii) of 
the Act and is a meaningful EHR user under section 1886(b)(3)(B)(ix) 
of the Act, there are four possible applicable percentage increases 
that could be applied to the standardized amount. We refer readers 
to section IV.A. of the preamble of this proposed rule for a 
complete discussion on the proposed FY 2016 inpatient hospital 
update to the standardized amount. We also refer readers to the 
table above for the four possible applicable percentage increases 
that would be applied to update the national standardized amount. 
The proposed standardized amounts shown in Tables 1A through 1C that 
are published in section VI. of this Addendum and that are available 
via the Internet on the CMS Web site reflect these differential 
amounts.
    Section 401(c) of Public Law 108-173 amended section 
1886(d)(9)(C)(i) of the Act and states that, for discharges 
occurring in a fiscal year (beginning with FY 2004), the Secretary 
shall compute an average standardized amount for hospitals located 
in any area of Puerto Rico that is equal to the average standardized 
amount computed under subclause (I) for FY 2003 for hospitals in a 
large urban area (or, beginning with FY 2005, for all hospitals in 
the previous fiscal year) increased by the applicable percentage 
increase under subsection (b)(3)(B) for the fiscal year involved. 
Therefore, the update to the Puerto Rico-specific operating 
standardized amount is subject to the applicable percentage increase 
set forth under section 1886(b)(3)(B)(i) of the Act, as amended by 
sections 3401(a) and 10319(a) of the Affordable Care Act (that is, 
the same update factor as for all other hospitals subject to the 
IPPS). Accordingly, we are proposing to establish an applicable 
percentage increase to the Puerto Rico-specific standardized amount 
of 1.9 percent for FY 2016.
    Although the update factors for FY 2016 are set by law, we are 
required by section 1886(e)(4) of the Act to recommend, taking into 
account MedPAC's recommendations, appropriate update factors for FY 
2016 for both IPPS hospitals and hospitals and hospital units 
excluded from the IPPS. Section 1886(e)(5)(A) of the Act requires 
that we publish our proposed recommendations in the Federal Register 
for public comment. Our recommendation on the update factors is set 
forth in Appendix B of this proposed rule.

4. Other Adjustments to the Average Standardized Amount

    As in the past, we are proposing to adjust the FY 2016 
standardized amount to remove the effects of the FY 2015 geographic 
reclassifications and outlier payments before applying the FY 2016 
updates. We then apply budget neutrality offsets for outliers and 
geographic reclassifications to the standardized amount based on 
proposed FY 2016 payment policies.
    We do not remove the prior year's budget neutrality adjustments 
for reclassification and recalibration of the DRG relative weights 
and for updated wage data because, in accordance with sections 
1886(d)(4)(C)(iii) and 1886(d)(3)(E) of the Act, estimated aggregate 
payments after updates in the DRG relative weights and wage index 
should equal estimated aggregate payments prior to the changes. If 
we removed the prior year's adjustment, we would not satisfy these 
conditions.
    Budget neutrality is determined by comparing aggregate IPPS 
payments before and after making changes that are required to be 
budget neutral (for example, changes to MS-DRG classifications, 
recalibration of the MS-DRG relative weights, updates to the wage 
index, and different geographic reclassifications). We include 
outlier payments in the simulations because they may be affected by 
changes in these parameters.
    In order to appropriately estimate aggregate payments in our 
modeling, we make several inclusions and exclusions so that the 
appropriate universe of claims and charges are included. We discuss 
IME Medicare Advantage payment amounts, fee-for-service only claims, 
and charges for anti-hemophilic blood factor and organ acquisition 
below.
    Consistent with our methodology established in the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50422 through 50433), because IME 
Medicare Advantage payments are made to IPPS hospitals under section 
1886(d) of the Act, we believe these payments must be part of these 
budget neutrality calculations. However, we note that it is not 
necessary to include Medicare Advantage IME payments in the outlier 
threshold calculation or the outlier offset to the standardized 
amount because the statute requires that outlier payments be not 
less than 5 percent nor more than 6 percent of total ``operating DRG 
payments,'' which does not include IME and DSH payments. We refer 
readers to the FY 2011 IPPS/LTCH PPS final rule for a complete 
discussion on our methodology of identifying and adding the total 
Medicare Advantage IME payment amount to the budget neutrality 
adjustments.
    In addition, consistent with the methodology in the FY 2012 
IPPS/LTCH PPS final rule, in order to ensure that we capture only 
fee-for-service claims, we are only including claims with a ``Claim 
Type'' of 60 (which is a field on the MedPAR file that indicates a 
claim is a fee-for-service claim).
    Finally, consistent with our methodology established in the FY 
2011 IPPS/LTCH PPS final rule (75 FR 50422 through 50423), we 
examined the MedPAR file and removed pharmacy charges for anti-
hemophilic blood factor (which are paid separately under the IPPS) 
with an indicator of ``3'' for blood clotting with a revenue code of 
``0636'' from the covered charge field for the budget neutrality 
adjustments. We also removed organ acquisition charges from the 
covered charge field for the budget neutrality adjustments because 
organ acquisition is a pass-through payment not paid under the IPPS.

[[Page 24628]]

    The Bundled Payments for Care Improvement (BPCI) initiative, 
developed under the authority of section 3021 of the Affordable Care 
Act (codified at section 1115A of the Act), is comprised of four 
broadly defined models of care, which link payments for multiple 
services beneficiaries receive during an episode of care. Under the 
BPCI initiative, organizations enter into payment arrangements that 
include financial and performance accountability for episodes of 
care. On January 31, 2013, CMS announced the first set of health 
care organizations selected to participate in the BPCI initiative. 
Additional organizations were selected in 2014. For additional 
information on the BPCI initiative, we refer readers to the CMS 
Center for Medicare and Medicaid Innovation's Web site at: http://innovation.cms.gov/initiatives/Bundled-Payments/index.html.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53341 through 
53343), for FY 2013 and subsequent fiscal years, we finalized a 
methodology to treat hospitals that participate in the BPCI 
initiative the same as prior fiscal years for the IPPS payment 
modeling and ratesetting process (which includes recalibration of 
the MS-DRG relative weights, ratesetting, calculation of the budget 
neutrality factors, and the impact analysis) without regard to a 
hospital's participation within these bundled payment models (that 
is, as if they are not participating in those models under the BPCI 
initiative). For FY 2016, we are proposing to continue to include 
all applicable data from subsection (d) hospitals participating in 
BPCI Models 1, 2, and 4 in our IPPS payment modeling and ratesetting 
calculations.
    The Affordable Care Act established the Hospital Readmissions 
Reduction Program and the Hospital VBP Program which adjust payments 
to certain IPPS hospitals beginning with discharges on or after 
October 1, 2012. Because the adjustments made under these programs 
affect the estimation of aggregate IPPS payments, in this proposed 
rule, consistent with our methodology established in the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53687 through 53688), we believe 
that it is appropriate to include adjustments for these programs 
within our budget neutrality calculations. We discuss the treatment 
of these two programs in the context of budget neutrality 
adjustments below.
    Section 1886(q) of the Act establishes the ``Hospital 
Readmissions Reduction Program'' effective for discharges from an 
``applicable hospital'' beginning on or after October 1, 2012, under 
which payments to those hospitals under section 1886(d) of the Act 
are reduced to account for certain excess readmissions. Under the 
Hospital Readmissions Reduction Program, for discharges beginning on 
October 1, 2012 discharges from an ``applicable hospital'' are paid 
at an amount equal to the product of the ``base operating DRG 
payment amount'' and an ``adjustment factor'' that accounts for 
excess readmissions for the hospital for the fiscal year plus any 
applicable add-on payments. We refer readers to section IV.E. of the 
preamble of this proposed rule for full details of our proposed FY 
2016 policy changes to the Hospital Readmissions Reduction Program. 
We also note that the Hospital Readmissions Reduction Program 
provided for under section 1886(q) of the Act is not budget neutral.
    Section 1886(o) of the Act requires the Secretary to establish a 
Hospital VBP Program under which, for discharges beginning on 
October 1, 2012, value-based incentive payments are made in a fiscal 
year to eligible subsection (d) hospitals based on their performance 
on measures established for a performance period for that fiscal 
year. As specified under section 1886(o)(7)(B)(i) of the Act, these 
value-based incentive payments are funded by a reduction applied to 
each eligible hospital's base-operating DRG payment amount, for each 
discharge occurring in the fiscal year. As required by section 
1886(o)(7)(A) of the Act, the total amount of allocated funds 
available for value-based incentive payments with respect to a 
fiscal year is equal to the total amount of base-operating DRG 
payment reductions, as estimated by the Secretary. In a given fiscal 
year, hospitals may earn a value-based incentive payment amount for 
a fiscal year that is greater than, equal to, or less than the 
reduction amount, based on their performance on quality measures 
under the Hospital VBP Program. Thus, the Hospital VBP Program is 
estimated to have no net effect on overall payments. We refer 
readers to section IV.F. of the preamble of this proposed rule for 
details regarding the Hospital VBP Program.
    Both the hospital readmissions payment adjustment (reduction) 
and the hospital VBP payment adjustment (redistribution) are applied 
on a claim-by-claim basis by adjusting, as applicable, the base-
operating DRG payment amount for individual subsection (d) 
hospitals, which affects the overall sum of aggregate payments on 
each side of the comparison within the budget neutrality 
calculations. For example, when we calculate the budget neutrality 
factor for MS-DRG reclassification and recalibration of the relative 
weights, we compare aggregate payments estimated using the prior 
year's GROUPER and relative weights to estimated payments using the 
new GROUPER and relative weights. (We refer readers to section 
II.A.4.a. of this Addendum for details.) Other factors, such as the 
DSH and IME payment adjustments, are the same on both sides of the 
comparison because we are only seeking to ensure that aggregate 
payments do not increase or decrease as a result of the changes of 
MS-DRG reclassification and recalibration.
    In order to properly determine aggregate payments on each side 
of the comparison, as we did for FY 2014 and FY 2015, for FY 2016 
and subsequent years, we are proposing to continue to apply the 
proposed hospital readmissions payment adjustment and the proposed 
hospital VBP payment adjustment on each side of the comparison, 
consistent with the methodology that we adopted in the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53687 through 53688). That is, we are 
proposing to apply the proposed readmissions payment adjustment 
factor and the proposed hospital VBP payment adjustment factor on 
both sides of our comparison of aggregate payments when determining 
all budget neutrality factors described in section II.A.4. of this 
Addendum.
    For the purpose of calculating the proposed FY 2016 readmissions 
payment adjustment factors, we are proposing to use excess 
readmission ratios and aggregate payments for excess readmissions 
based on admissions from the prior fiscal year's applicable period 
because hospitals have had the opportunity to review and correct 
these data before the data were made public under the policy we 
adopted regarding the reporting of hospital-specific readmission 
rates, consistent with section 1886(q)(6) of the Act. For FY 2016, 
in this proposed rule, we are proposing to calculate the 
readmissions payment adjustment factors using excess readmission 
ratios and aggregate payments for excess readmissions based on 
admissions from the finalized applicable period for FY 2016 as 
hospitals have had the opportunity to review and correct these data 
under our policy regarding the reporting of hospital-specific 
readmission rates consistent with section 1886(q)(6) of the Act. We 
discuss our proposed policy regarding the reporting of hospital-
specific readmission rates for FY 2016 in section IV.E.3.f of the 
preamble of this proposed rule. (For additional information on our 
general policy for the reporting of hospital-specific readmission 
rates, consistent with section 1886(q)(6) of the Act, we refer 
readers to the FY 2013 IPPS/LTCH PPS final rule (77 FR 53399 through 
53400).)
    In addition, for FY 2016, in this proposed rule, for the purpose 
of modeling aggregate payments when determining all budget 
neutrality factors, we are proposing to use proxy hospital VBP 
payment adjustment factors for FY 2016 that are based on data from a 
historical period because hospitals have not yet had an opportunity 
to review and submit corrections for their data from the FY 2016 
performance period. (For additional information on our policy 
regarding the review and correction of hospital-specific measure 
rates under the Hospital VBP Program, consistent with section 
1886(o)(10)(A)(ii) of the Act, we refer readers to the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53578 through 53581), the CY 2012 OPPS/
ASC final rule with comment period (76 FR 74544 through 74547), and 
the Hospital Inpatient VBP final rule (76 FR 26534 through 26536).)
    The Affordable Care Act also established section 1886(r) of the 
Act, which modifies the methodology for computing the Medicare DSH 
payment adjustment beginning in FY 2014. Beginning in FY 2014, IPPS 
hospitals receiving Medicare DSH payment adjustments will receive an 
empirically justified Medicare DSH payment equal to 25 percent of 
the amount that would previously have been received under the 
statutory formula set forth under section 1886(d)(5)(F) of the Act 
governing the Medicare DSH payment adjustment. In accordance with 
section 1886(r)(2) of the Act, the remaining amount, equal to an 
estimate of 75 percent of what otherwise would have been paid as 
Medicare DSH payments, reduced to reflect changes in the percentage 
of individuals under age 65 who are uninsured and an additional 
statutory adjustment, will be

[[Page 24629]]

available to make additional payments to Medicare DSH hospitals 
based on their share of the total amount of uncompensated care 
reported by Medicare DSH hospitals for a given time period. In order 
to properly determine aggregate payments on each side of the 
comparison for budget neutrality, prior to FY 2014, we included 
estimated Medicare DSH payments on both sides of our comparison of 
aggregate payments when determining all budget neutrality factors 
described in section II.A.4. of this Addendum.
    To do this for FY 2016 (as we did for FY 2014 and FY 2015), we 
are proposing to include estimated empirically justified Medicare 
DSH payments that will be paid in accordance with section 1886(r)(1) 
of the Act and estimates of the additional uncompensated care 
payments made to hospitals receiving Medicare DSH payment 
adjustments as described by section 1886(r)(2) of the Act. That is, 
we are proposing to consider estimated empirically justified 
Medicare DSH payments at 25 percent of what would otherwise have 
been paid, and also the estimated additional uncompensated care 
payments for hospitals receiving Medicare DSH payment adjustments on 
both sides of our comparison of aggregate payments when determining 
all budget neutrality factors described in section II.A.4. of this 
Addendum.
    We note that, when calculating total payments for budget 
neutrality, to determine total payments for SCHs, we model total 
hospital-specific rate payments and total Federal rate payments and 
then include whichever one of the total payments is greater. As 
discussed in section IV.D. of the preamble to this proposed rule and 
below, we are proposing to continue the FY 2014 finalized 
methodology under which we would take into consideration 
uncompensated care payments in the comparison of payments under the 
Federal rate and the hospital-specific rate for SCHs. Therefore, we 
are proposing to include estimated uncompensated care payments in 
this comparison.
    In addition, we are proposing to include an adjustment to the 
standardized amount for those hospitals that are not meaningful EHR 
users in our modeling of aggregate payments for budget neutrality 
for FY 2016. We did not include this adjustment for FY 2015 because 
that was the first year hospitals experienced a reduction to their 
applicable percentage increase due to whether they are meaningful 
EHR users and data were not available at that time. However, we 
believe it is appropriate to include this adjustment for FY 2016 
because FY 2016 will be the second year for which hospitals will 
experience this reduction and data on the prior year's performance 
are now available. Payments for hospitals would be estimated based 
on the proposed applicable standardized amount in Tables 1A and 1B 
for discharges occurring in FY 2016.

a. Proposed Recalibration of MS-DRG Relative Weights and Updated 
Wage Index--Budget Neutrality Adjustment

    Section 1886(d)(4)(C)(iii) of the Act specifies that, beginning 
in FY 1991, the annual DRG reclassification and recalibration of the 
relative weights must be made in a manner that ensures that 
aggregate payments to hospitals are not affected. As discussed in 
section II.H. of the preamble of this proposed rule, we normalized 
the recalibrated MS-DRG relative weights by an adjustment factor so 
that the average case relative weight after recalibration is equal 
to the average case relative weight prior to recalibration. However, 
equating the average case relative weight after recalibration to the 
average case relative weight before recalibration does not 
necessarily achieve budget neutrality with respect to aggregate 
payments to hospitals because payments to hospitals are affected by 
factors other than average case relative weight. Therefore, as we 
have done in past years, we are proposing to make a budget 
neutrality adjustment to ensure that the requirement of section 
1886(d)(4)(C)(iii) of the Act is met.
    Section 1886(d)(3)(E)(i) of the Act requires us to update the 
hospital wage index on an annual basis beginning October 1, 1993. 
This provision also requires us to make any updates or adjustments 
to the wage index in a manner that ensures that aggregate payments 
to hospitals are not affected by the change in the wage index. 
Section 1886(d)(3)(E)(i) of the Act requires that we implement the 
wage index adjustment in a budget neutral manner. However, section 
1886(d)(3)(E)(ii) of the Act sets the labor-related share at 62 
percent for hospitals with a wage index less than or equal to 
1.0000, and section 1886(d)(3)(E)(i) of the Act provides that the 
Secretary shall calculate the budget neutrality adjustment for the 
adjustments or updates made under that provision as if section 
1886(d)(3)(E)(ii) of the Act had not been enacted. In other words, 
this section of the statute requires that we implement the updates 
to the wage index in a budget neutral manner, but that our budget 
neutrality adjustment should not take into account the requirement 
that we set the labor-related share for hospitals with wage indexes 
less than or equal to 1.0000 at the more advantageous level of 62 
percent. Therefore, for purposes of this budget neutrality 
adjustment, section 1886(d)(3)(E)(i) of the Act prohibits us from 
taking into account the fact that hospitals with a wage index less 
than or equal to 1.0000 are paid using a labor-related share of 62 
percent. Consistent with current policy, for FY 2016, we are 
proposing to adjust 100 percent of the wage index factor for 
occupational mix. We describe the occupational mix adjustment in 
section III.E. of the preamble of this proposed rule.
    For FY 2016, to comply with the requirement that MS-DRG 
reclassification and recalibration of the relative weights be budget 
neutral for the Puerto Rico standardized amount and the hospital-
specific rates, we used FY 2014 discharge data to simulate payments 
and compared the following:
     Aggregate payments using the FY 2015 labor-related 
share percentages, the FY 2015 relative weights, and the FY 2015 
pre-reclassified wage data, and applied the proposed FY 2016 
hospital readmissions payment adjustments and estimated FY 2016 
hospital VBP payment adjustments; and
     Aggregate payments using the FY 2015 labor-related 
share percentages, the proposed FY 2016 relative weights, and the FY 
2015 pre-reclassified wage data, and applied the same proposed FY 
2016 hospital readmissions payment adjustments and estimated FY 2016 
hospital VBP payment adjustments applied above.
    Based on this comparison, we computed a proposed budget 
neutrality adjustment factor equal to 0.998335. As discussed in 
section IV. of this Addendum, we also are proposing to apply the MS-
DRG reclassification and recalibration budget neutrality factor of 
0.998335 to the hospital-specific rates that are effective for cost 
reporting periods beginning on or after October 1, 2015.
    In order to meet the statutory requirements that we do not take 
into account the labor-related share of 62 percent when computing 
wage index budget neutrality adjustment factor, it was necessary to 
use a three-step process to comply with the requirements that MS-DRG 
reclassification and recalibration of the relative weights and the 
updated wage index and labor-related share have no effect on 
aggregate payments for IPPS hospitals. Under the first step, we 
determined a proposed MS-DRG reclassification and recalibration 
budget neutrality adjustment factor of 0.998335 (by using the same 
methodology described above to determine the proposed MS-DRG 
reclassification and recalibration budget neutrality factor for the 
Puerto Rico standardized amount and hospital-specific rates). Under 
the second step, to compute a proposed budget neutrality adjustment 
factor for wage index and labor-related share percentage changes we 
used FY 2014 discharge data to simulate payments and compared the 
following:
     Aggregate payments using the proposed FY 2016 relative 
weights and the FY 2015 pre-reclassified wage indexes, applied the 
FY 2015 labor-related share of 69.6 percent to all hospitals 
(regardless of whether the hospital's wage index was above or below 
1.0000), and applied the proposed FY 2016 hospital readmissions 
payment adjustment and the estimated FY 2016 hospital VBP payment 
adjustment; and
     Aggregate payments using the proposed FY 2016 relative 
weights and the proposed FY 2016 pre-reclassified wage indexes, 
applied the proposed labor-related share for FY 2016 of 69.6 percent 
to all hospitals (regardless of whether the hospital's wage index 
was above or below 1.0000), and applied the same proposed FY 2016 
hospital readmissions payment adjustments and estimated FY 2016 
hospital VBP payment adjustments applied above.
    In addition, we applied the proposed MS-DRG reclassification and 
recalibration budget neutrality adjustment factor (derived in the 
first step) to the payment rates that were used to simulate payments 
for this comparison of aggregate payments from FY 2015 to FY 2016. 
By applying this methodology, we determined a proposed budget 
neutrality adjustment factor of 0.998681 for proposed changes to the 
wage index. Finally, we multiplied the proposed MS-DRG 
reclassification and recalibration budget neutrality adjustment 
factor of 0.998335 (derived in the first step) by the proposed

[[Page 24630]]

budget neutrality adjustment factor of 0.998681 for proposed changes 
to the wage index (derived in the second step) to determine the 
proposed MS-DRG reclassification and recalibration and updated wage 
index budget neutrality adjustment factor of 0.997018.

b. Reclassified Hospitals--Proposed Budget Neutrality Adjustment

    Section 1886(d)(8)(B) of the Act provides that certain rural 
hospitals are deemed urban. In addition, section 1886(d)(10) of the 
Act provides for the reclassification of hospitals based on 
determinations by the MGCRB. Under section 1886(d)(10) of the Act, a 
hospital may be reclassified for purposes of the wage index.
    Under section 1886(d)(8)(D) of the Act, the Secretary is 
required to adjust the standardized amount to ensure that aggregate 
payments under the IPPS after implementation of the provisions of 
sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act are equal 
to the aggregate prospective payments that would have been made 
absent these provisions. We note that the wage index adjustments 
provided for under section 1886(d)(13) of the Act are not budget 
neutral. Section 1886(d)(13)(H) of the Act provides that any 
increase in a wage index under section 1886(d)(13) shall not be 
taken into account in applying any budget neutrality adjustment with 
respect to such index under section 1886(d)(8)(D) of the Act. To 
calculate the proposed budget neutrality adjustment factor for FY 
2016, we used FY 2014 discharge data to simulate payments and 
compared the following:
     Aggregate payments using the proposed FY 2016 labor-
related share percentages, proposed FY 2016 relative weights and 
proposed FY 2016 wage data prior to any reclassifications under 
sections 1886(d)(8)(B) and (C) and 1886(d)(10) of the Act, and 
applied the proposed FY 2016 hospital readmissions payment 
adjustments and the estimated FY 2016 hospital VBP payment 
adjustments; and
     Aggregate payments using the proposed FY 2016 labor-
related share percentages, proposed FY 2016 relative weights, and 
proposed FY 2016 wage data after such reclassifications, and applied 
the same proposed FY 2016 hospital readmissions payment adjustments 
and the estimated FY 2016 hospital VBP payment adjustments applied 
above.
    We note that the reclassifications applied under the second 
simulation and comparison are those listed in Table 2 associated 
with this proposed, which is available via the Internet on the CMS 
Web site. This table reflects reclassification crosswalks proposed 
for FY 2016, and apply the proposed policies explained in section 
III. of the preamble to this proposed rule. Based on these 
simulations, we calculated a proposed budget neutrality adjustment 
factor of 0.988486 to ensure that the effects of these provisions 
are budget neutral, consistent with the statute.
    The proposed FY 2016 budget neutrality adjustment factor was 
applied to the standardized amount after removing the effects of the 
FY 2015 budget neutrality adjustment factor. We note that the 
proposed FY 2016 budget neutrality adjustment reflects FY 2016 wage 
index reclassifications approved by the MGCRB or the Administrator 
at the time of development of the proposed rule.

c. Proposed Rural Floor Budget Neutrality Adjustment

    Under Sec.  412.64(e)(4), we make an adjustment to the wage 
index to ensure that aggregate payments after implementation of the 
rural floor under section 4410 of the BBA (Pub. L. 105-33) and the 
imputed floor under Sec.  412.64(h)(4) are equal to the aggregate 
prospective payments that would have been made in the absence of 
such provisions. Consistent with section 3141 of the Affordable Care 
Act and as discussed in section III.H. of the preamble of this 
proposed rule and codified at Sec.  412.64(e)(4)(ii), the budget 
neutrality adjustment for the rural and imputed floor is a national 
adjustment to the wage index.
    As noted above and as discussed in section III.H.2. of the 
preamble of this proposed rule, in the FY 2012 IPPS/LTCH PPS final 
rule, we extended the imputed floor calculated under the original 
methodology through FY 2013 (76 FR 51594). In the FY 2013 IPPS/LTCH 
PPS final rule, we established an alternative methodology for 
calculating the imputed floor and established a policy that the 
minimum wage index value for an all-urban state would be the higher 
of the value determined under the original methodology or the value 
computed using the alternative methodology (77 FR 53368 through 
53369). Consistent with the methodology for treating the imputed 
floor, similar to the methodology we used in the FY 2013 IPPS/LTCH 
PPS final rule (77 FR 53368 through 53369), we included this 
alternative methodology for computing the imputed floor index in the 
calculation of the uniform, national rural floor budget neutrality 
adjustment for FY 2014. For FY 2015, as discussed in the FY 2015 
IPPS/LTCH PPS final rule (79 FR 49969 through 49971), we extended 
the imputed floor for another year using the higher of the value 
determined under the original methodology or the alternative 
methodology. As discussed in section III.H.2. of the preamble of 
this proposed rule, we are proposing to extend the imputed floor 
using the higher of the value determined under the original 
methodology or the alternative methodology for FY 2016. Therefore, 
in order to ensure that aggregate payments to hospitals are not 
affected, similar to prior years, we would follow our policy of 
including the proposed imputed floor in the proposed rural floor 
budget neutrality adjustment to the wage index.
    Under the new OMB labor market area delineations adopted 
beginning with the FY 2015 wage indexes, New Jersey, Rhode Island, 
and Delaware are all-urban States. Therefore, for FY 2016, the 
proposed imputed floor was applied to the wage index for hospitals 
located in these three States.
    Similar to our calculation in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50369 through 50370), for FY 2016, we are proposing to 
calculate a national rural Puerto Rico wage index (used to adjust 
the labor-related share of the national standardized amount for 
hospitals located in Puerto Rico which receive 75 percent of the 
national standardized amount) and a rural Puerto Rico-specific wage 
index (which is used to adjust the labor-related share of the Puerto 
Rico-specific standardized amount for hospitals located in Puerto 
Rico that receive 25 percent of the Puerto Rico-specific 
standardized amount). Because there are no rural Puerto Rico 
hospitals with established wage data, our calculation of the 
proposed FY 2016 rural Puerto Rico wage index is based on the policy 
adopted in the FY 2008 IPPS final rule with comment period (72 FR 
47323). That is, we will use the unweighted average of the wage 
indexes from all CBSAs (urban areas) that are contiguous (share a 
border with) to the rural counties to compute the rural floor (72 FR 
47323; 76 FR 51594). Under the new OMB labor market area 
delineations, except for Arecibo, Puerto Rico (CBSA 11640), all 
other Puerto Rico urban areas are contiguous to a rural area. 
Therefore, based on our existing policy, the proposed FY 2016 rural 
Puerto Rico wage index is calculated based on the average of the 
proposed FY 2016 wage indexes for the following urban areas: 
Aguadilla-Isabela, PR (CBSA 10380); Guayama, PR (CBSA 25020); 
Mayaguez, PR (CBSA 32420); Ponce, PR (CBSA 38660), San German, PR 
(CBSA 41900) and San Juan-Carolina-Caguas, PR (CBSA 41980).
    To calculate the national rural floor and imputed floor budget 
neutrality adjustment factors and the Puerto Rico-specific rural 
floor budget neutrality adjustment factor, we are proposing to use 
FY 2014 discharge data to simulate payments and the proposed post-
reclassified national and Puerto Rico-specific wage indexes and 
compared the following:
     The national and Puerto Rico-specific simulated 
payments without the proposed national rural floor and proposed 
imputed floor and proposed Puerto Rico-specific rural floor applied; 
and
     The national and Puerto Rico-specific simulated 
payments with the proposed national rural floor and proposed imputed 
floor and proposed Puerto Rico-specific rural floor applied.
    Based on this comparison, we determined a proposed national 
rural budget neutrality adjustment factor of 0.990135 and the 
proposed Puerto Rico-specific budget neutrality adjustment factor of 
0.987626. The national adjustment was applied to the national wage 
indexes to produce a proposed national rural floor budget neutral 
wage index and the proposed Puerto Rico-specific adjustment was 
applied to the Puerto Rico-specific wage indexes to produce a 
proposed Puerto Rico-specific rural floor budget neutral wage index.

d. Wage Index Transition Budget Neutrality

    As discussed in section III.G. of the preamble of this proposed 
rule, in the past, we have provided for transition periods when 
adopting changes that have significant payment implications, 
particularly large negative impacts.
    Similar to FY 2005, for FY 2015, we determined that the 
transition to using the new OMB labor market area delineations would 
have the largest impact on hospitals that were located in an urban 
county that became rural under the new OMB delineations or hospitals 
deemed urban

[[Page 24631]]

where the urban area became rural under the new OMB delineations. To 
alleviate the decreased payments associated with having a rural wage 
index, in calculating the area wage index, similar to the transition 
provided in the FY 2005 IPPS final rule, we finalized a policy to 
generally assign these counties the urban wage index value of the 
CBSA to which they are physically located in for FY 2014 for FYs 
2015, 2016, and 2017. Fiscal year 2016 will be the second year of 
this 3-year transition policy. We note that the 1-year blended wage 
index transitional policy for all hospitals that would experience 
any decrease in their wage index value expires in FY 2015.
    As discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50372 through 50373), in the past, CMS has budget neutralized 
transitional wage indexes. We stated that because we established a 
policy that allows for the application of a transitional wage index 
only when it benefits the hospital, we believe that it would be 
appropriate to ensure that such a transitional policy does not 
increase aggregate Medicare payments beyond the payments that would 
be made had we simply adopted the OMB delineations without any 
transitional provisions. Therefore, as we did for FY 2015, for FY 
2016, we are proposing to use our exceptions and adjustments 
authority under section 1886(d)(5)(I)(i) of the Act to make an 
adjustment to the national and Puerto Rico-specific standardized 
amounts to ensure that total payments for the effect of the 3-year 
transitional wage index provisions would equal what payments would 
have been if we had fully adopted the new OMB delineations without 
providing these transitional provisions. To calculate the proposed 
transitional wage index budget neutrality factor for FY 2016, we 
used FY 2014 discharge data to simulate payments and compared the 
following:
     Aggregate payments using the OMB delineations for FY 
2016, the proposed FY 2016 relative weights, proposed FY 2016 wage 
data after such reclassifications under sections 1886(d)(8)(B) and 
(C) and 1886(d)(10) of the Act, application of the proposed rural 
floor budget neutrality adjustment factor to the wage index, and 
application of the proposed FY 2016 hospital readmissions payment 
adjustments and the estimated FY 2016 hospital VBP payment 
adjustments; and
     Aggregate payments using the OMB delineations for FY 
2016, the proposed FY 2016 relative weights, proposed FY 2016 wage 
data after such reclassifications under sections 1886(d)(8)(B) and 
(C) and 1886(d)(10) of the Act, application of the proposed rural 
floor budget neutrality adjustment factor to the wage index, 
application of the 3-year transitional wage indexes, and application 
of the same proposed FY 2016 hospital readmissions payment 
adjustments and the estimated FY 2016 hospital VBP payment 
adjustments applied above.
    Based on these simulations, we calculated a proposed budget 
neutrality adjustment factor of 0.999995. Therefore, for FY 2016, we 
are proposing to apply a transitional wage index budget neutrality 
adjustment factor of 0.999995 to the national average and Puerto 
Rico-specific standardized amounts to ensure that the effects of 
these proposed transitional wage indexes are budget neutral.
    We note that the proposed budget neutrality adjustment factor 
calculated above is based on the increase in payments in FY 2016 
that would result from the second year of the 3-year transitional 
wage index policies. Therefore, we are proposing to apply this 
proposed budget neutrality adjustment factor as a one-time 
adjustment to the FY 2016 national and Puerto Rico-specific 
standardized amounts in order to offset the increase in payments in 
FY 2016 as a result of this second year of the 3-year transitional 
wage index. For subsequent fiscal years, we would not take into 
consideration the adjustment factor applied to the national and 
Puerto Rico-specific standardized amounts in the previous fiscal 
year's update when calculating the current fiscal year transitional 
wage index budget neutrality adjustment factor (that is, this 
adjustment will not be applied cumulatively).

e. Proposed Case-Mix Budget Neutrality Adjustment

(1) Background

    Below we summarize the proposed recoupment adjustment to the FY 
2016 payment rates, as required by section 631 of ATRA, to account 
for the increase in aggregate payments as a result of not completing 
the prospective adjustment authorized under section 7(b)(1)(A) of 
Public Law 110-90 until FY 2013. We refer readers to section II.D. 
of the preamble of this proposed rule for a complete discussion 
regarding our proposed policies for FY 2016 in this proposed rule 
and previously finalized policies (including our historical 
adjustments to the payment rates) relating to the effect of changes 
in documentation and coding that do not reflect real changes in 
case-mix. (2) Recoupment or Repayment Adjustment Authorized by 
Section 631 of the American Taxpayer Relief Act of 2012 (ATRA) to 
the National Standardized Amount
    Section 631 of the ATRA amended section 7(b)(1)(B) of Public Law 
110-90 to require the Secretary to make a recoupment adjustment 
totaling $11 billion by FY 2017. Our actuaries estimated that if CMS 
were to fully account for the $11 billion recoupment required by 
section 631 of ATRA in FY 2014, a one-time -9.3 percent adjustment 
to the standardized amount would be necessary. It is often our 
practice to delay or phase-in payment rate adjustments over more 
than 1 year, in order to moderate the effect on payment rates in any 
1 year. Therefore, consistent with the policies that we have adopted 
in many similar cases, for FY 2014 and FY 2015, we applied a -0.8 
percent adjustment to the standardized amount. For FY 2016, we are 
proposing to apply a -0.8 percent adjustment to the standardized 
amount. We note that, as section 631 of the ATRA instructs the 
Secretary to make a recoupment adjustment only to the standardized 
amount, this adjustment would not apply to the Puerto Rico-specific 
standardized amount and hospital-specific payment rates.

f. Proposed Rural Community Hospital Demonstration Program Adjustment

    As discussed in section IV.I. of the preamble of this proposed 
rule, section 410A of Public Law 108-173 originally required the 
Secretary to establish a demonstration program that modifies 
reimbursement for inpatient services for up to 15 small rural 
hospitals. Section 410A(c)(2) of Public Law 108-173 requires that in 
conducting the demonstration program under this section, the 
Secretary shall ensure that the aggregate payments made by the 
Secretary do not exceed the amount which the Secretary would have 
paid if the demonstration program under this section was not 
implemented.
    Sections 3123 and 10313 of the Affordable Care Act extended the 
demonstration program for an additional 5-year period, and allowed 
up to 30 hospitals to participate in 20 States with low population 
densities determined by the Secretary. (In determining which States 
to include in the expansion, the Secretary is required to use the 
same criteria and data that the Secretary used to determine the 
States for purposes of the initial 5-year period.) In previous final 
rules, we have adjusted the national IPPS payment rates by an amount 
sufficient to account for the added costs of this demonstration 
program. In other words, we have applied budget neutrality across 
the payment system as a whole rather than merely across the 
participants of this demonstration program. We believe the language 
of the statutory budget neutrality requirement permits the agency to 
implement the budget neutrality provision in this manner. The 
statutory language requires that aggregate payments made by the 
Secretary do not exceed the amount which the Secretary would have 
paid if the demonstration was not implemented, but does not identify 
the range across which aggregate payments must be held equal.
    For FY 2016, we are proposing to adjust the national IPPS 
payment rates according to the proposed methodology set forth in 
section IV.I. of the preamble of this proposed rule, to account for 
the estimated additional costs of the demonstration program for FY 
2016. In addition, we are proposing to subtract from the budget 
neutrality offset amount for FY 2016 the amount by which the budget 
neutrality offset amount that was finalized in the FY 2009 IPPS 
final rule exceeds the actual costs of the demonstration for FY 2009 
(as shown in the finalized cost reports for cost reporting periods 
beginning in FY 2009). The proposed total budget neutrality offset 
amount that we are proposing to be applied to the FY 2016 IPPS rates 
is $17,738,497. Accordingly, using the most recent data available to 
account for the estimated costs of the demonstration program, for FY 
2016, we computed a proposed factor of 0.999808 for the rural 
community hospital demonstration program budget neutrality 
adjustment that will be applied to the IPPS standard Federal payment 
rate.

g. Proposed Outlier Payments

    Section 1886(d)(5)(A) of the Act provides for payments in 
addition to the basic prospective payments for ``outlier'' cases

[[Page 24632]]

involving extraordinarily high costs. To qualify for outlier 
payments, a case must have costs greater than the sum of the 
prospective payment rate for the MS-DRG, any IME and DSH payments, 
any new technology add-on payments, and the ``outlier threshold'' or 
``fixed-loss'' amount (a dollar amount by which the costs of a case 
must exceed payments in order to qualify for an outlier payment). We 
refer to the sum of the prospective payment rate for the MS-DRG, any 
IME and DSH payments, any new technology add-on payments, and the 
outlier threshold as the outlier ``fixed-loss cost threshold.'' To 
determine whether the costs of a case exceed the fixed-loss cost 
threshold, a hospital's CCR is applied to the total covered charges 
for the case to convert the charges to estimated costs. Payments for 
eligible cases are then made based on a marginal cost factor, which 
is a percentage of the estimated costs above the fixed-loss cost 
threshold. The marginal cost factor for FY 2016 is 80 percent, the 
same marginal cost factor we have used since FY 1995 (59 FR 45367).
    In accordance with section 1886(d)(5)(A)(iv) of the Act, outlier 
payments for any year are projected to be not less than 5 percent 
nor more than 6 percent of total operating DRG payments (which does 
not include IME and DSH payments) plus outlier payments. When 
setting the outlier threshold, we compute the 5.1 percent target by 
dividing the total operating outlier payments by the total operating 
DRG payments plus outlier payments. We do not include any other 
payments such as IME and DSH within the outlier target amount. 
Therefore, it is not necessary to include Medicare Advantage IME 
payments in the outlier threshold calculation. Section 1886(d)(3)(B) 
of the Act requires the Secretary to reduce the average standardized 
amount by a factor to account for the estimated proportion of total 
DRG payments made to outlier cases. Similarly, section 
1886(d)(9)(B)(iv) of the Act requires the Secretary to reduce the 
average standardized amount applicable to hospitals located in 
Puerto Rico to account for the estimated proportion of total DRG 
payments made to outlier cases. More information on outlier payments 
may be found on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/outlier.htm.

(1) Proposed FY 2016 Outlier Fixed-Loss Cost Threshold

    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50977 through 
50983), in response to public comments on the FY 2013 IPPS/LTCH PPS 
proposed rule, we made changes to our methodology for projecting the 
outlier fixed-loss cost threshold for FY 2014. We refer readers to 
the FY 2014 IPPS/LTCH PPS final rule for detailed discussion of the 
changes.
    For FY 2016, we are proposing to continue to use the same 
methodology that we used in FY 2014 and FY 2015. As we have done in 
the past, to calculate the proposed FY 2016 outlier threshold, we 
simulated payments by applying proposed FY 2016 payment rates and 
policies using cases from the FY 2014 MedPAR file. Therefore, in 
order to determine the proposed FY 2016 outlier threshold, we 
inflated the charges on the MedPAR claims by 2 years, from FY 2014 
to FY 2016. As discussed in the FY 2015 IPPS/LTCH PPS final rule, we 
believe a methodology that is based on 1-year of charge data will 
provide a more stable measure to project the average charge per case 
because our prior methodology used a 6-month measure, which 
inherently uses fewer claims than a 1-year measure and makes it more 
susceptible to fluctuations in the average charge per case as a 
result of any significant charge increases or decreases by 
hospitals.
    In the FY 2015 IPPS/LTCH final rule (79 FR 50375), we stated 
that commenters were concerned that they were unable to replicate 
the calculation of the charge inflation factor that CMS used in the 
proposed rule. In response to those comments, we stated that, 
consistent with our longstanding policy since FY 2005, we continue 
to believe that it is optimal to use the most recent period of 
charge data available to measure charge inflation. We also stated we 
would consider how best to provide additional information on the 
charge inflation factor for future years. In response to those 
comments, below we are providing a table that provides covered 
charges and cases by quarter in the periods used to calculate the 
charge inflation factor.

----------------------------------------------------------------------------------------------------------------
                                Covered charges                           Covered  charges
                               (January 1, 2013,    Cases (January 1,    (January 1, 2014,    Cases (January 1,
           Quarter              through December      2013,  through     through  December      2014,  through
                                   31, 2013)        December 31, 2013)       31, 2014)        December 31, 2014)
----------------------------------------------------------------------------------------------------------------
1...........................     $126,534,546,428            2,640,744     $125,988,476,809            2,480,809
2...........................      118,741,812,697            2,507,483      121,297,544,913            2,433,390
3...........................      115,745,380,133            2,425,636      116,785,744,335            2,321,731
4...........................      119,331,676,066            2,406,770       89,923,763,220            1,764,002
                             -----------------------------------------------------------------------------------
    Total...................      480,353,415,324            9,980,633      453,995,529,277            8,999,932
----------------------------------------------------------------------------------------------------------------

    Under this new methodology, to compute the 1-year average 
annualized rate-of-change in charges per case for FY 2016, we are 
proposing to compare the average covered charge per case of $48,129 
($480,353,415,324/9,980,633) from the second quarter of FY 2013 
through the first quarter of FY 2014 (January 1, 2013, through 
December 31, 2013) to the average covered charge per case of $50,444 
($453,995,529,277/8,999,932) from the second quarter of FY 2014 
through the first quarter of FY 2015 (January 1, 2014, through 
December 31, 2014). This rate-of-change is 4.8 percent (1.048116) or 
9.8 percent (1.098547) over 2 years.
    As we have done in the past, in this FY 2016 IPPS/LTCH PPS 
proposed rule, we are proposing to establish the proposed FY 2016 
outlier threshold using hospital CCRs from the December 2014 update 
to the Provider-Specific File (PSF)--the most recent available data 
at the time of the development of this proposed rule. In the 
following instances, we substituted and used the proposed FY 2016 
statewide average operating and/or capital CCR instead of the 
operating and/or capital CCR from the PSF if a hospital's operating 
and/or capital CCR is 0 or blank, if a hospital's operating and/or 
capital CCR is above the ceilings described below. For FY 2016, we 
also are proposing to continue to apply an adjustment factor to the 
CCRs to account for cost and charge inflation (as explained below). 
We are proposing that, if more recent data became available, we 
would use that data to calculate the final FY 2016 outlier 
threshold.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50979), we 
adopted a new methodology to adjust the CCRs. Specifically, we 
finalized a policy to compare the national average case-weighted 
operating and capital CCR from the most recent update of the PSF to 
the national average case-weighted operating and capital CCR from 
the same period of the prior year.
    Therefore, as we did for FY 2014 and FY 2015, for FY 2016, we 
are proposing to adjust the CCRs from the December 2014 update of 
the PSF by comparing the percentage change in the national average 
case-weighted operating CCR and capital CCR from the December 2013 
update of the PSF to the national average case-weighted operating 
CCR and capital CCR from the December 2014 update of the PSF. We 
note that we used total transfer-adjusted cases from FY 2014 to 
determine the national average case-weighted CCRs for both sides of 
the comparison. As stated in the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50979), we believe that it is appropriate to use the same 
case count on both sides of the comparison because this will produce 
the true percentage change in the average case-weighted operating 
and capital CCR from one year to the next without any effect from a 
change in case count on different sides of the comparison.
    Using the proposed methodology above, we calculated a proposed 
December 2013 operating national average case-weighted CCR of 
0.288792 and a proposed December 2014 operating national average 
case-

[[Page 24633]]

weighted CCR of 0.280581. We then calculated the percentage change 
between the two national operating case-weighted CCRs by subtracting 
the December 2013 operating national average case-weighted CCR from 
the December 2014 operating national average case-weighted CCR and 
then dividing the result by the December 2013 national operating 
average case-weighted CCR. This resulted in a proposed national 
operating CCR adjustment factor of 0.971568.
    We used the same methodology proposed above to adjust the 
capital CCRs. Specifically, we calculated a December 2013 capital 
national average case-weighted CCR of 0.025014 and a December 2014 
capital national average case-weighted CCR of 0.024500. We then 
calculated the percentage change between the two national capital 
case-weighted CCRs by subtracting the December 2013 capital national 
average case-weighted CCR from the December 2014 capital national 
average case-weighted CCR and then dividing the result by the 
December 2013 capital national average case-weighted CCR. This 
resulted in a proposed national capital CCR adjustment factor of 
0.979474.
    Consistent with our methodology used in the past and as stated 
in the FY 2009 IPPS final rule (73 FR 48763), we continue to believe 
that it is appropriate to apply only a 1-year adjustment factor to 
the CCRs. On average, it takes approximately 9 months for a MAC to 
tentatively settle a cost report from the fiscal year end of a 
hospital's cost reporting period. The average ``age'' of hospitals' 
CCRs from the time the MAC inserts the CCR in the PSF until the 
beginning of FY 2016 is approximately 1 year. Therefore, as stated 
above, we believe a 1-year adjustment factor to the CCRs is 
appropriate.
    As discussed above, for FY 2016, we are proposing to apply the 
second year of the 3-year transitional wage index because of the 
adoption of the new OMB labor market area delineations. Also, as 
discussed in section III.B.3. of the preamble to the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50160 and 50161) and in section III.H.3. 
of the preamble of this proposed rule, in accordance with section 
10324(a) of the Affordable Care Act, we created a wage index floor 
of 1.0000 for all hospitals located in States determined to be 
frontier States. We note that the frontier State floor adjustments 
would be calculated and applied after rural and imputed floor budget 
neutrality adjustments are calculated for all labor market areas, in 
order to ensure that no hospital in a frontier State would receive a 
wage index less than 1.0000 due to the proposed rural and imputed 
floor adjustment. In accordance with section 10324(a) of the 
Affordable Care Act, the frontier State adjustment will not be 
subject to budget neutrality, and will only be extended to hospitals 
geographically located within a frontier State. However, for 
purposes of estimating the proposed outlier threshold for FY 2016, 
it was necessary to apply the proposed 3-year transitional wage 
indexes and adjust the proposed wage index of those eligible 
hospitals in a frontier State when calculating the proposed outlier 
threshold that results in outlier payments being 5.1 percent of 
total payments for FY 2016. If we did not take the above into 
account, our estimate of total FY 2016 payments would be too low, 
and, as a result, our proposed outlier threshold would be too high, 
such that estimated outlier payments would be less than our 
projected 5.1 percent of total payments.
    As we did in establishing the FY 2009 outlier threshold (73 FR 
57891), in our projection of FY 2016 outlier payments, we are 
proposing not to make any adjustments for the possibility that 
hospitals' CCRs and outlier payments may be reconciled upon cost 
report settlement. We continue to believe that, due to the policy 
implemented in the June 9, 2003 Outlier final rule (68 FR 34494), 
CCRs will no longer fluctuate significantly and, therefore, few 
hospitals will actually have these ratios reconciled upon cost 
report settlement. In addition, it is difficult to predict the 
specific hospitals that will have CCRs and outlier payments 
reconciled in any given year. We note that we have instructed MACs 
to identify for CMS any instances where (1) a hospital's actual CCR 
for the cost reporting period fluctuates plus or minus 10 percentage 
points compared to the interim CCR used to calculate outlier 
payments when a bill is processed; and (2) the total outlier 
payments for the hospital exceeded $500,000.00 for that period. Our 
simulations assume that CCRs accurately measure hospital costs based 
on information available to us at the time we set the outlier 
threshold. For these reasons, we are proposing not to make any 
assumptions regarding the effects of reconciliation on the outlier 
threshold calculation.
    As described in sections IV.E. and IV.F. respectively, of the 
preamble of this proposed rule, sections 1886(q) and 1886(o) of the 
Act establish the Hospital Readmissions Reduction Program and the 
Hospital VBP Program, respectively. We do not believe that it is 
appropriate to include the hospital VBP payment adjustments and the 
hospital readmissions payment adjustments in the proposed outlier 
threshold calculation or the proposed outlier offset to the 
standardized amount. Specifically, consistent with our definition of 
the base operating DRG payment amount for the Hospital Readmissions 
Reduction Program under Sec.  412.152 and the Hospital VBP Program 
under Sec.  412.160, outlier payments under section 1886(d)(5)(A) of 
the Act are not affected by these payment adjustments. Therefore, 
outlier payments would continue to be calculated based on the 
unadjusted base DRG payment amount (as opposed to using the base-
operating DRG payment amount adjusted by the hospital readmissions 
payment adjustment and the hospital VBP payment adjustment). 
Consequently, we are proposing to exclude the hospital VBP payment 
adjustments and the hospital readmissions payment adjustments from 
the calculation of the proposed outlier fixed-loss cost threshold.
    We note that, to the extent section 1886(r) of the Act modifies 
the DSH payment methodology under section 1886(d)(5)(F), the new 
uncompensated care payment under section 1886(r)(2), like the 
empirically justified Medicare DSH payment under section 1886(r)(1), 
may be considered an amount payable under section 1886(d)(5)(F) of 
the Act such that it would be reasonable to include the payment in 
the outlier determination under section 1886(d)(5)(A). As we did for 
FYs 2014 and 2015, we also are proposing for FY 2016 to allocate an 
estimated per-discharge uncompensated care payment amount to all 
cases for the hospitals eligible to receive the uncompensated care 
payment amount in the calculation of the outlier fixed-loss cost 
threshold methodology. We continue to believe that allocating an 
eligible hospital's estimated uncompensated care payment to all 
cases equally in the calculation of the outlier fixed-loss cost 
threshold would best approximate the amount we would pay in 
uncompensated care payments during the year because, when we make 
claim payments to a hospital eligible for such payments, we would be 
making estimated per-discharge uncompensated care payments to all 
cases equally. Furthermore, we continue to believe that using the 
estimated per-claim uncompensated care payment amount to determine 
outlier estimates provides predictability as to the amount of 
uncompensated care payments included in the calculation of outlier 
payments. Therefore, consistent with the methodology used in FYs 
2014 and 2015 to calculate the outlier fixed-loss cost threshold, 
for FY 2016, we are proposing to include estimated FY 2016 
uncompensated care payments in the computation of the proposed 
outlier fixed-loss cost threshold. Specifically, we are proposing to 
use the estimated per-discharge uncompensated care payments to 
hospitals eligible for the uncompensated care payment for all cases 
in the calculation of the proposed outlier fixed-loss cost threshold 
methodology.
    Using this methodology, we are proposing an outlier fixed-loss 
cost threshold for FY 2016 equal to the prospective payment rate for 
the MS-DRG, plus any IME, empirically justified Medicare DSH 
payments, estimated uncompensated care payment, and any add-on 
payments for new technology, plus $24,485.
    We note that the proposed FY 2016 fixed-loss cost threshold is 
lower than the FY 2015 final outlier fixed-loss cost threshold of 
$24,626. We believe that the decrease in the charge inflation factor 
(compared to the FY 2015 charge inflation factor) contributed to a 
lower proposed outlier fixed-loss threshold for FY 2016. As charges 
decrease, so does the amount of outlier payments. As a result, it 
was necessary for us to lower the proposed outlier fixed-loss cost 
threshold to increase the amount of outlier payments expended in 
order to reach the 5.1 percent target.

(2) Other Proposed Changes Concerning Outliers

    As stated in the FY 1994 IPPS final rule (58 FR 46348), we 
establish an outlier threshold that is applicable to both hospital 
inpatient operating costs and hospital inpatient capital-related 
costs. When we modeled the combined operating and capital outlier 
payments, we found that using a common threshold resulted in a lower 
percentage of outlier payments for capital-related costs than for 
operating costs. We project that the thresholds for FY 2016 will 
result in outlier payments that will equal 5.1 percent of

[[Page 24634]]

operating DRG payments and 6.43 percent of capital payments based on 
the Federal rate.
    In accordance with section 1886(d)(3)(B) of the Act, we are 
proposing to reduce the FY 2016 standardized amount by the same 
percentage to account for the projected proportion of payments paid 
as outliers.
    The proposed outlier adjustment factors that would be applied to 
the standardized amount based on the proposed FY 2016 outlier 
threshold are as follows:

------------------------------------------------------------------------
                                             Operating
                                           Standardized       Capital
                                              Amounts      Federal  Rate
------------------------------------------------------------------------
National................................        0.948999        0.935731
Puerto Rico.............................        0.926818        0.925658
------------------------------------------------------------------------

    We are proposing to apply the outlier adjustment factors to the 
proposed FY 2016 payment rates after removing the effects of the FY 
2015 outlier adjustment factors on the standardized amount.
    To determine whether a case qualifies for outlier payments, we 
apply hospital-specific CCRs to the total covered charges for the 
case. Estimated operating and capital costs for the case are 
calculated separately by applying separate operating and capital 
CCRs. These costs are then combined and compared with the outlier 
fixed-loss cost threshold.
    Under our current policy at Sec.  412.84, we calculate operating 
and capital CCR ceilings and assign a statewide average CCR for 
hospitals whose CCRs exceed 3.0 standard deviations from the mean of 
the log distribution of CCRs for all hospitals. Based on this 
calculation, for hospitals for which the fiscal intermediary or MAC 
computes operating CCRs greater than 1.22 or capital CCRs greater 
than 0.173, or hospitals for which the fiscal intermediary or MAC is 
unable to calculate a CCR (as described under Sec.  412.84(i)(3) of 
our regulations), statewide average CCRs are used to determine 
whether a hospital qualifies for outlier payments. Table 8A listed 
in section VI. of this Addendum (and available only via the Internet 
on the CMS Web site) contains the proposed statewide average 
operating CCRs for urban hospitals and for rural hospitals for which 
the fiscal intermediary or MAC is unable to compute a hospital-
specific CCR within the above range. Effective for discharges 
occurring on or after October 1, 2015, these statewide average 
ratios would replace the ratios posted on our Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/FY-2014-IPPS-Final-Rule-Home-Page-Items/FY-2014-IPPS-Final-Rule-CMS-1599-F-Tables.html. Table 8B listed in section 
VI. of this Addendum (and available via the Internet on the CMS Web 
site) contains the comparable proposed statewide average capital 
CCRs. As previously stated, the proposed CCRs in Tables 8A and 8B 
would be used during FY 2016 when hospital-specific CCRs based on 
the latest settled cost report either are not available or are 
outside the range noted above. Table 8C listed in section VI. of 
this Addendum (and available via the Internet on the CMS Web site) 
contains the proposed statewide average total CCRs used under the 
LTCH PPS as discussed in section V. of this Addendum.
    We finally note that we published a manual update (Change 
Request 3966) to our outlier policy on October 12, 2005, which 
updated Chapter 3, Section 20.1.2 of the Medicare Claims Processing 
Manual. The manual update covered an array of topics, including 
CCRs, reconciliation, and the time value of money. We encourage 
hospitals that are assigned the statewide average operating and/or 
capital CCRs to work with their fiscal intermediary or MAC on a 
possible alternative operating and/or capital CCR as explained in 
Change Request 3966. Use of an alternative CCR developed by the 
hospital in conjunction with the fiscal intermediary or MAC can 
avoid possible overpayments or underpayments at cost report 
settlement, thereby ensuring better accuracy when making outlier 
payments and negating the need for outlier reconciliation. We also 
note that a hospital may request an alternative operating or capital 
CCR ratio at any time as long as the guidelines of Change Request 
3966 are followed. In addition, as mentioned above, we published an 
additional manual update (Change Request 7192) to our outlier policy 
on December 3, 2010, which also updated Chapter 3, Section 20.1.2 of 
the Medicare Claims Processing Manual. The manual update outlines 
the outlier reconciliation process for hospitals and Medicare 
contractors. To download and view the manual instructions on outlier 
reconciliation, we refer readers to the CMS Web site: http://www.cms.hhs.gov/manuals/downloads/clm104c03.pdf.

(3) FY 2014 and FY 2015 Outlier Payments

    In the FY 2015 IPPS/LTCH PPS final rule correction notice (79 FR 
59681), we stated that, based on available data, we estimated that 
actual FY 2014 outlier payments would be approximately 5.68 percent 
of actual total MS-DRG payments. This estimate was computed based on 
simulations using the FY 2013 MedPAR file (discharge data for FY 
2013 claims). That is, the estimate of actual outlier payments did 
not reflect actual FY 2014 claims, but instead reflected the 
application of FY 2014 payment rates and policies to available FY 
2013 claims.
    Our current estimate, using available FY 2014 claims data, is 
that actual outlier payments for FY 2014 were approximately 5.34 
percent of actual total MS-DRG payments. Therefore, the data 
indicate that, for FY 2014, the percentage of actual outlier 
payments relative to actual total payments is higher than we 
projected for FY 2014. Consistent with the policy and statutory 
interpretation we have maintained since the inception of the IPPS, 
we do not make retroactive adjustments to outlier payments to ensure 
that total outlier payments for FY 2014 are equal to 5.1 percent of 
total MS-DRG payments.
    We currently estimate that, using the latest CCRs from the 
December 2014 update of the PSF, actual outlier payments for FY 2015 
will be approximately 4.88 percent of actual total MS-DRG payments, 
approximately 0.22 percentage point lower than the 5.1 percent we 
projected when setting the outlier policies for FY 2015. This 
estimate of 4.88 percent is based on simulations using the FY 2014 
MedPAR file (discharge data for FY 2014 claims).

5. Proposed FY 2016 Standardized Amount

    The adjusted standardized amount is divided into labor-related 
and nonlabor-related portions. Tables 1A and 1B listed and published 
in section VI. of this Addendum (and available via the Internet) 
contain the national standardized amounts that we are proposing to 
apply to all hospitals, except hospitals located in Puerto Rico, for 
FY 2016. The proposed Puerto Rico-specific amounts are shown in 
Table 1C listed and published in section VI. of this Addendum (and 
available via the Internet on the CMS Web site). The proposed 
amounts shown in Tables 1A and 1B differ only in that the labor-
related share applied to the standardized amounts in Table 1A is 
69.6 percent, and the labor-related share applied to the 
standardized amounts in Table 1B is 62 percent. In accordance with 
sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act, we are 
proposing to apply a labor-related share of 62 percent, unless 
application of that percentage would result in lower payments to a 
hospital than would otherwise be made. In effect, the statutory 
provision means that we will apply a labor-related share of 62 
percent for all hospitals whose wage indexes are less than or equal 
to 1.0000.
    In addition, Tables 1A and 1B include the proposed standardized 
amounts reflecting the proposed applicable percentage increases for 
FY 2016.
    Under section 1886(d)(9)(A)(ii) of the Act, the Federal portion 
of the Puerto Rico payment rate is based on the discharge-weighted 
average of the national large urban standardized amount (this amount 
is set forth in Table 1A). The proposed labor-related and nonlabor-
related portions of the national average standardized amounts for 
Puerto Rico hospitals for FY 2016 are set forth in Table 1C listed 
and published in section VI. of this Addendum (and available via the 
Internet on the CMS Web site). This table also includes the proposed 
Puerto Rico-specific standardized amounts. The labor-related share 
applied to the proposed Puerto Rico-specific standardized amount is 
the proposed labor-related share of 63.2 percent, or 62 percent, 
depending on which provides higher payments to the hospital. 
(Section 1886(d)(9)(C)(iv) of the Act, as amended by

[[Page 24635]]

section 403(b) of Public Law 108-173, provides that the labor-
related share for hospitals located in Puerto Rico be 62 percent, 
unless the application of that percentage would result in lower 
payments to the hospital.)
    The following table illustrates the changes from the FY 2015 
national standardized amount to the proposed FY 2016 national 
standardized amount. The second through fifth columns display the 
proposed changes from the FY 2015 standardized amounts for each 
applicable FY 2016 standardized amount. The first row of the table 
shows the updated (through FY 2015) average standardized amount 
after restoring the FY 2015 offsets for outlier payments, 
demonstration budget neutrality, geographic reclassification budget 
neutrality, new labor market delineation wage Index transition 
budget neutrality and the retrospective documentation and coding 
adjustment under section 7(b)(1)(B) of Public Law 110-90. The MS-DRG 
reclassification and recalibration and wage index budget neutrality 
adjustment factors are cumulative. Therefore, those FY 2015 
adjustment factors are not removed from this table.

             Comparison of FY 2015 Standardized Amounts to the Proposed FY 2016 Standardized Amounts
----------------------------------------------------------------------------------------------------------------
                                                      Hospital submitted   Hospital did NOT    Hospital did NOT
                                  Hospital submitted   quality data and     submit quality      submit quality
                                   quality data and        is NOT a          data and is a     data and is NOT a
                                    is a meaningful     meaningful EHR      meaningful EHR      meaningful EHR
                                       EHR user              user                user                user
----------------------------------------------------------------------------------------------------------------
FY 2015 Base Rate after           If Wage Index is    If Wage Index is    If Wage Index is    If Wage Index is
 removing:.                        Greater Than        Greater Than        Greater Than        Greater Than
1. FY 2015 Geographic              1.0000: Labor       1.0000: Labor       1.0000: Labor       1.0000: Labor
 Reclassification Budget           (69.6%):            (69.6%):            (69.6%):            (69.6%):
 Neutrality (0.990429).            $4,324.23;          $4,324.23;          $4,324.23;          $4,324.23;
2. FY 2015 Rural Community         Nonlabor (30.4%):   Nonlabor (30.4%):   Nonlabor (30.4%):   Nonlabor (30.4%):
 Hospital Demonstration Program    $1,888.74.          $1,888.74.          $1,888.74.          $1,888.74.
 Budget Neutrality (0.999313).
3. Cumulative FY 2008, FY 2009,
 FY 2012, FY 2013 and FY 2014,
 FY 2015 Documentation and
 Coding Adjustment as Required
 under Sections 7(b)(1)(A) and
 7(b)(1)(B) of Public Law 110-90
 and Documentation and Coding
 Recoupment Adjustment as
 required under Section 631 of
 the American Taxpayer Relief
 Act of 2012 (0.9329).
4. FY 2015 Operating Outlier      If Wage Index is    If Wage Index is    If Wage Index is    If Wage Index is
 Offset (0.948999).                less Than or        less Than or        less Than or        less Than or
5. FY 2015 New Labor Market        Equal to 1.0000:    Equal to 1.0000:    Equal to 1.0000:    Equal to 1.0000:
 Delineation Wage Index            Labor (62%):        Labor (62%):        Labor (62%):        Labor (62%):
 Transition Budget Neutrality      $3,852.04;          $3,852.04;          $3,852.04;          $3,852.04;
 Factor (0.998854).                Nonlabor (38%):     Nonlabor (38%):     Nonlabor (38%):     Nonlabor (38%):
                                   $2,360.93.          $2,360.93.          $2,360.93.          $2,360.93.
Proposed FY 2016 Update Factor..  1.019.............  1.0055............  1.01225...........  0.99875.
Proposed FY 2016 MS[dash]DRG      0.997018..........  0.997018..........  0.997018..........  0.997018.
 Recalibration and Wage Index
 Budget Neutrality Factor.
Proposed FY 2016                  0.988486..........  0.988486..........  0.988486..........  0.988486.
 Reclassification Budget
 Neutrality Factor.
Proposed FY 2016 Rural Community  0.999808..........  0.999808..........  0.999808..........  0.999808.
 Demonstration Program Budget
 Neutrality Factor.
Proposed FY 2016 Operating        0.948999..........  0.948999..........  0.948999..........  0.98999.
 Outlier Factor.
Cumulative Factor: FY 2008, FY    0.9255............  0.9255............  0.9255............  0.9255.
 2009, FY 2012, FY 2013, FY
 2014, FY 2015 and FY 2016
 Documentation and Coding
 Adjustment as Required under
 Sections 7(b)(1)(A) and
 7(b)(1)(B) of Public Law 110-90
 and Documentation and Coding
 Recoupment Adjustment as
 required under Section 631 of
 the American Taxpayer Relief
 Act of 2012.
Proposed FY 2016 New Labor        0.999995..........  0.999995..........  0.999995..........  0.999995.
 Market Delineation Wage Index
 Three Year Hold Harmless
 Transition Budget Neutrality
 Factor.
Proposed National Standardized    Labor: $3,813.40;   Labor: $3,762.88;   Labor: $3,788.14;   Labor: $3,737.62;
 Amount for FY 2016 if Wage        Nonlabor:           Nonlabor:           Nonlabor:           Nonlabor:
 Index is Greater Than 1.0000;     $1,665.63.          $1,643.56.          $1,654.60.          $1,632.53.
 Labor/Non-Labor Share
 Percentage (69.6/30.4).
Proposed National Standardized    Labor: $3,397.00;   Labor: $3,351.99;   Labor: $3,374.50;   Labor: $3,329.49;
 Amount for FY 2016 if Wage        Nonlabor:           Nonlabor:           Nonlabor:           Nonlabor:
 Index is less Than or Equal to    $2,082.03.          $2,054.45.          $2,068.24.          $2,040.66.
 1.0000; Labor/Non-Labor Share
 Percentage (62/38).
----------------------------------------------------------------------------------------------------------------

    The following table illustrates the proposed changes from the FY 
2015 Puerto Rico-specific payment rate for hospitals located in 
Puerto Rico. The second column shows the proposed changes from the 
FY 2015 Puerto Rico specific payment rate for hospitals with a 
Puerto Rico-specific wage index greater than 1.0000. The third 
column shows the proposed changes from the FY 2015 Puerto Rico 
specific payment rate for hospitals with a Puerto Rico-specific wage 
index less than or equal to 1.0000. The first row of the table shows 
the updated (through FY 2015) Puerto Rico-specific payment rate 
after restoring the FY 2015 offsets for Puerto Rico-specific outlier 
payments, rural community hospital demonstration program budget 
neutrality, and the geographic reclassification budget neutrality. 
The MS-DRG recalibration budget neutrality adjustment factor is 
cumulative and is not removed from this table.

 Comparison of FY 2015 Puerto Rico-Specific Payment Rate to the Proposed
                FY 2016 Puerto Rico-Specific Payment Rate
------------------------------------------------------------------------
                                    Proposed update
                                    (1.9 percent);      Proposed update
                                     wage index is      (1.9 percent);
                                     greater than     wage index is less
                                  1.0000; labor/non-   than or equal to
                                      labor share     1.0000; labor/non-
                                   percentage (63.2/      labor share
                                         36.8)        percentage (62/38)
------------------------------------------------------------------------
FY 2015 Puerto Rico Base Rate,    Labor: $1,758.02;   Labor: $1,724.64;
 after removing:.                  Nonlabor:           Nonlabor:
1. FY 2015 Geographic              $1,023.66.          $1,057.04.
 Reclassification Budget
 Neutrality (0.990429).

[[Page 24636]]

 
2. FY 2015 Rural Community
 Hospital Demonstration Program
 Budget Neutrality (0.999313).
3. FY 2015 Puerto Rico Operating
 Outlier Offset (0.926334).
4. FY 2015 New Labor Market
 Delineation Wage Index
 Transition Budget Neutrality
 Factor (0.998854).
Proposed FY 2016 Update Factor..  1.019.............  1.019.
Proposed FY 2016 MS[dash]DRG      0.998335..........  0.998335.
 Recalibration Budget Neutrality
 Factor.
Proposed FY 2016                  0.988486..........  0.988486.
 Reclassification Budget
 Neutrality Factor.
Proposed FY 2016 Rural Community  0.999808..........  0.999808.
 Hospital Demonstration Program
 Budget Neutrality Factor.
Proposed FY 2016 New Labor        0.999995..........  0.999995.
 Market Delineation Wage Index
 Three Year Hold Harmless
 Transition Budget Neutrality
 Factor.
Proposed FY 2016 Puerto Rico      0.926818..........  0.926818.
 Operating Outlier Factor.
Proposed Puerto Rico-Specific     Labor: $1,638.15;   Labor: $1,607.05;
 Payment Rate for FY 2016.         Nonlabor: $953.86.  Nonlabor:
                                                       $984.96.
------------------------------------------------------------------------

B. Proposed Adjustments for Area Wage Levels and Cost-of-Living

    Tables 1A through 1C, as published in section VI. of this 
Addendum (and available via the Internet), contain the proposed 
labor-related and nonlabor-related shares that we are proposing to 
use to calculate the prospective payment rates for hospitals located 
in the 50 States, the District of Columbia, and Puerto Rico for FY 
2016. This section addresses two types of adjustments to the 
standardized amounts that are made in determining the proposed 
prospective payment rates as described in this Addendum.

1. Proposed Adjustment for Area Wage Levels

    Sections 1886(d)(3)(E) and 1886(d)(9)(C)(iv) of the Act require 
that we make an adjustment to the labor-related portion of the 
national and Puerto Rico prospective payment rates, respectively, to 
account for area differences in hospital wage levels. This 
adjustment is made by multiplying the labor-related portion of the 
adjusted standardized amounts by the appropriate wage index for the 
area in which the hospital is located. In section III. of the 
preamble of this proposed rule, we discuss the data and methodology 
for the proposed FY 2016 wage index.

2. Adjustment for Cost-of-Living in Alaska and Hawaii

    Section 1886(d)(5)(H) of the Act provides discretionary 
authority to the Secretary to make such adjustments as the Secretary 
deems appropriate to take into account the unique circumstances of 
hospitals located in Alaska and Hawaii. Higher labor-related costs 
for these two States are taken into account in the adjustment for 
area wages described above. To account for higher nonlabor-related 
costs for these two States, we multiply the nonlabor-related portion 
of the standardized amount for hospitals located in Alaska and 
Hawaii by an adjustment factor.
    In the FY 2013 IPPS/LTCH PPS final rule, we established a 
methodology to update the COLA factors for Alaska and Hawaii that 
were published by the U.S. Office of Personnel Management (OPM) 
every 4 years (at the same time as the update to the labor-related 
share of the IPPS market basket), beginning in FY 2014. We refer 
readers to the FY 2013 IPPS/LTCH PPS proposed and final rules for 
additional background and a detailed description of this methodology 
(77 FR 28145 through 28146 and 77 FR 53700 through 53701, 
respectively).
    For FY 2014, in the FY 2014 IPPS/LTCH PPS final rule (78 FR 
50985 through 50987), we updated the COLA factors published by OPM 
for 2009 (as these are the last COLA factors OPM published prior to 
transitioning from COLAs to locality pay) using the methodology that 
we finalized in the FY 2013 IPPS/LTCH PPS final rule.
    Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final 
rule, we are proposing to continue to use the same COLA factors in 
FY 2016 that were used in FY 2015 to adjust the nonlabor-related 
portion of the standardized amount for hospitals located in Alaska 
and Hawaii. Below is a table listing the proposed COLA factors for 
FY 2016.

  Proposed FY 2016 Cost-of-Living Adjustment Factors: Alaska and Hawaii
                                Hospitals
------------------------------------------------------------------------
                                                               Cost of
                                                                living
                            Area                              adjustment
                                                                factor
------------------------------------------------------------------------
Alaska:
    City of Anchorage and 80-kilometer (50-mile) radius by          1.23
     road..................................................
    City of Fairbanks and 80-kilometer (50-mile) radius by          1.23
     road..................................................
    City of Juneau and 80-kilometer (50-mile) radius by             1.23
     road..................................................
    Rest of Alaska.........................................         1.25
Hawaii:
    City and County of Honolulu............................         1.25
    County of Hawaii.......................................         1.19
    County of Kauai........................................         1.25
    County of Maui and County of Kalawao...................         1.25
------------------------------------------------------------------------

    Based on the policy finalized in the FY 2013 IPPS/LTCH PPS final 
rule, the next update to the COLA factors for Alaska and Hawaii 
would occur in FY 2018.

C. Calculation of the Proposed Prospective Payment Rates

General Formula for Calculation of the Prospective Payment Rates for FY 
2016

    In general, the operating prospective payment rate for all 
hospitals paid under the IPPS located outside of Puerto Rico, except 
SCHs, for FY 2016 equals the Federal rate (which includes 
uncompensated care payments). We note that the MDH program expired 
for discharges beginning on April 1, 2015 under current law.
    SCHs are paid based on whichever of the following rates yields 
the greatest aggregate payment: The Federal national rate (which, as 
discussed in section IV.D. of the preamble of this proposed rule, 
includes uncompensated care payments); the updated hospital-specific 
rate based on FY 1982 costs per discharge; the updated hospital-
specific rate based on FY 1987 costs per discharge; the updated 
hospital-specific rate based on FY 1996 costs per discharge; or the 
updated hospital-specific rate based on FY 2006 costs per discharge 
to determine the rate that yields the greatest aggregate payment.
    The prospective payment rate for SCHs for FY 2016 equals the 
higher of the applicable Federal rate, or the hospital-specific rate 
as described below.

[[Page 24637]]

    The prospective payment rate for hospitals located in Puerto 
Rico for FY 2016 equals 25 percent of the Puerto Rico-specific 
payment rate plus 75 percent of the applicable national rate.

1. Federal Rate

    The Federal rate is determined as follows:
    Step 1--Select the applicable average standardized amount 
depending on whether the hospital submitted qualifying quality data 
and is a meaningful EHR user, as described above.
    Step 2--Multiply the labor-related portion of the standardized 
amount by the applicable wage index for the geographic area in which 
the hospital is located or the area to which the hospital is 
reclassified.
    Step 3--For hospitals located in Alaska and Hawaii, multiply the 
nonlabor-related portion of the standardized amount by the 
applicable cost-of-living adjustment factor.
    Step 4--Add the amount from Step 2 and the nonlabor-related 
portion of the standardized amount (adjusted, if applicable, under 
Step 3).
    Step 5--Multiply the final amount from Step 4 by the relative 
weight corresponding to the applicable MS-DRG (Table 5 listed in 
section VI. of this Addendum and available via the Internet).
    The Federal payment rate as determined in Step 5 may then be 
further adjusted if the hospital qualifies for either the IME or DSH 
adjustment. In addition, for hospitals that qualify for a low-volume 
payment adjustment under section 1886(d)(12) of the Act and 42 CFR 
412.101(b), the payment in Step 5 would be increased by a specified 
formula. The base-operating DRG payment amount may be further 
adjusted by the hospital readmissions payment adjustment and the 
hospital VBP payment adjustment as described under sections 1886(q) 
and 1886(o) of the Act, respectively. Finally, we add the 
uncompensated care payment to the total claim payment amount. We 
note that, as discussed above, we take uncompensated care payments 
into consideration when calculating outlier payments.

2. Hospital-Specific Rate (Applicable Only to SCHs)

a. Calculation of Hospital-Specific Rate

    Section 1886(b)(3)(C) of the Act provides that SCHs are paid 
based on whichever of the following rates yields the greatest 
aggregate payment: The Federal rate (which, as discussed in section 
IV.D. of the preamble of this proposed rule, includes uncompensated 
care payments); the updated hospital-specific rate based on FY 1982 
costs per discharge; the updated hospital-specific rate based on FY 
1987 costs per discharge; the updated hospital-specific rate based 
on FY 1996 costs per discharge; or the updated hospital-specific 
rate based on FY 2006 costs per discharge to determine the rate that 
yields the greatest aggregate payment.
    For a more detailed discussion of the calculation of the 
hospital-specific rates, we refer readers to the FY 1984 IPPS 
interim final rule (48 FR 39772); the April 20, 1990 final rule with 
comment period (55 FR 15150); the FY 1991 IPPS final rule (55 FR 
35994); and the FY 2001 IPPS final rule (65 FR 47082). We also refer 
readers to section IV.D. of the preamble of this proposed rule for a 
complete discussion on empirically justified Medicare DSH and 
uncompensated care payments.

b. Updating the FY 1982, FY 1987, FY 1996 and FY 2006 Hospital-Specific 
Rate for FY 2016

    Section 1886(b)(3)(B)(iv) of the Act provides that the 
applicable percentage increase applicable to the hospital-specific 
rates for SCHs equals the applicable percentage increase set forth 
in section 1886(b)(3)(B)(i) of the Act (that is, the same update 
factor as for all other hospitals subject to the IPPS). Because the 
Act sets the update factor for SCHs equal to the update factor for 
all other IPPS hospitals, the update to the hospital-specific rates 
for SCHs is subject to the amendments to section 1886(b)(3)(B) of 
the Act made by sections 3401(a) and 10319(a) of the Affordable Care 
Act. Accordingly, the proposed applicable percentage increases to 
the hospital-specific rates applicable to SCHs are the following:

----------------------------------------------------------------------------------------------------------------
                                                     Hospital        Hospital      Hospital did    Hospital did
                                                     submitted       submitted      NOT submit      NOT submit
                                                   quality data    quality data    quality data    quality data
                     FY 2016                         and is a      and is NOT a      and is a      and is NOT a
                                                  meaningful EHR  meaningful EHR  meaningful EHR  meaningful EHR
                                                       user            user            user            user
----------------------------------------------------------------------------------------------------------------
Proposed Market Basket                                       2.7             2.7             2.7             2.7
 Rate[dash]of[dash]Increase.....................
Proposed Adjustment for Failure to Submit                    0.0             0.0          -0.675          -0.675
 Quality Data under Section 1886(b)(3)(B)(viii)
 of the Act.....................................
Proposed Adjustment for Failure to be a                      0.0           -1.35             0.0           -1.35
 Meaningful EHR User under Section
 1886(b)(3)(B)(ix) of the Act...................
Proposed MFP Adjustment under Section                       -0.6            -0.6            -0.6            -0.6
 1886(b)(3)(B)(xi) of the Act...................
Statutory Adjustment under Section                          -0.2            -0.2            -0.2            -0.2
 1886(b)(3)(B)(xii) of the Act..................
Proposed Applicable Percentage Increase Applied              1.9            0.55           1.225          -0.125
 to Hospital Specific Rate......................
----------------------------------------------------------------------------------------------------------------

    For a complete discussion of the applicable percentage increase 
applied to the hospital-specific rates for SCHs, we refer readers to 
section IV.A. of the preamble of this proposed rule.
    In addition, because SCHs use the same MS-DRGs as other 
hospitals when they are paid based in whole or in part on the 
hospital-specific rate, the hospital-specific rate is adjusted by a 
budget neutrality factor to ensure that changes to the MS-DRG 
classifications and the recalibration of the MS-DRG relative weights 
are made in a manner so that aggregate IPPS payments are unaffected. 
Therefore, a SCH's hospital-specific rate is adjusted by the 
proposed MS-DRG reclassification and recalibration budget neutrality 
factor of 0.998335, as discussed in section III. of this Addendum. 
The resulting rate is used in determining the proposed payment rate 
that an SCH would receive for its discharges beginning on or after 
October 1, 2015. We note that, in this proposed rule, for FY 2016, 
we are not proposing to make a documentation and coding adjustment 
to the hospital-specific rate. We refer readers to section II.D. of 
the preamble of this proposed rule for a complete discussion 
regarding our proposed policies and previously finalized policies 
(including our historical adjustments to the payment rates) relating 
to the effect of changes in documentation and coding that do not 
reflect real changes in case-mix.

3. General Formula for Calculation of Prospective Payment Rates for 
Hospitals Located in Puerto Rico Beginning on or After October 1, 2015, 
and Before October 1, 2016

    Section 1886(d)(9)(E)(iv) of the Act provides that, effective 
for discharges occurring on or after October 1, 2004, hospitals 
located in Puerto Rico are paid based on a blend of 75 percent of 
the national prospective payment rate and 25 percent of the Puerto 
Rico-specific rate.

a. Puerto Rico-Specific Rate

    The Puerto Rico-specific prospective payment rate is determined 
as follows:
    Step 1--Select the applicable average standardized amount 
considering the applicable wage index (obtained from Table 1C 
published in section VI. of this Addendum and available via the 
Internet).
    Step 2--Multiply the labor-related portion of the standardized 
amount by the applicable Puerto Rico-specific wage index.
    Step 3--Add the amount from Step 2 and the nonlabor-related 
portion of the standardized amount.
    Step 4--Multiply the amount from Step 3 by the applicable MS-DRG 
relative weight (obtained from Table 5 listed in section VI. of this 
Addendum and available via the Internet).
    Step 5--Multiply the result in Step 4 by 25 percent.

[[Page 24638]]

b. National Prospective Payment Rate

    The national prospective payment rate is determined as follows:
    Step 1--Select the applicable national average standardized 
amount.
    Step 2--Multiply the labor-related portion of the national 
average standardized amount by the applicable wage index for the 
geographic area in which the hospital is located or the area to 
which the hospital is reclassified.
    Step 3--Add the amount from Step 2 and the nonlabor-related 
portion of the national average standardized amount.
    Step 4--Multiply the amount from Step 3 by the applicable MS-DRG 
relative weight (obtained from Table 5 listed in section VI. of this 
Addendum and available via the Internet on the CMS Web site).
    Step 5--Multiply the result in Step 4 by 75 percent.
    The sum of the Puerto Rico-specific rate and the national 
prospective payment rate computed above equals the prospective 
payment rate for a given discharge for a hospital located in Puerto 
Rico. This payment rate is then further adjusted if the hospital 
qualifies for either the IME or DSH adjustment.
    Finally, we add the uncompensated care payment to the total 
claim payment amount. We note that, as discussed above, we take 
uncompensated care payments into consideration when calculating 
outlier payments.

III. Proposed Changes to Payment Rates for Acute Care Hospital 
Inpatient Capital-Related Costs for FY 2016

    The PPS for acute care hospital inpatient capital-related costs 
was implemented for cost reporting periods beginning on or after 
October 1, 1991. Effective with that cost reporting period, over a 
10-year transition period (which extended through FY 2001) the 
payment methodology for Medicare acute care hospital inpatient 
capital-related costs changed from a reasonable cost-based 
methodology to a prospective methodology (based fully on the Federal 
rate).
    The basic methodology for determining Federal capital 
prospective rates is set forth in the regulations at 42 CFR 412.308 
through 412.352. Below we discuss the factors that we used to 
determine the proposed capital Federal rate for FY 2016, which would 
be effective for discharges occurring on or after October 1, 2015.
    The 10-year transition period ended with hospital cost reporting 
periods beginning on or after October 1, 2001 (FY 2002). Therefore, 
for cost reporting periods beginning in FY 2002, all hospitals 
(except ``new'' hospitals under Sec.  412.304(c)(2)) are paid based 
on the capital Federal rate. For FY 1992, we computed the standard 
Federal payment rate for capital-related costs under the IPPS by 
updating the FY 1989 Medicare inpatient capital cost per case by an 
actuarial estimate of the increase in Medicare inpatient capital 
costs per case. Each year after FY 1992, we update the capital 
standard Federal rate, as provided at Sec.  412.308(c)(1), to 
account for capital input price increases and other factors. The 
regulations at Sec.  412.308(c)(2) also provide that the capital 
Federal rate be adjusted annually by a factor equal to the estimated 
proportion of outlier payments under the capital Federal rate to 
total capital payments under the capital Federal rate. In addition, 
Sec.  412.308(c)(3) requires that the capital Federal rate be 
reduced by an adjustment factor equal to the estimated proportion of 
payments for exceptions under Sec.  412.348. (We note that, as 
discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53705), 
there is generally no longer a need for an exceptions payment 
adjustment factor.) However, in limited circumstances, an additional 
payment exception for extraordinary circumstances is provided for 
under Sec.  412.348(f) for qualifying hospitals. Therefore, in 
accordance with Sec.  412.308(c)(3), an exceptions payment 
adjustment factor may need to be applied if such payments are made. 
Section 412.308(c)(4)(ii) requires that the capital standard Federal 
rate be adjusted so that the effects of the annual DRG 
reclassification and the recalibration of DRG weights and changes in 
the geographic adjustment factor (GAF) are budget neutral.
    Section 412.374 provides for blended payments to hospitals 
located in Puerto Rico under the IPPS for acute care hospital 
inpatient capital-related costs. Accordingly, under the capital PPS, 
we compute a separate payment rate specific to hospitals located in 
Puerto Rico using the same methodology used to compute the national 
Federal rate for capital-related costs. In accordance with section 
1886(d)(9)(A) of the Act, under the IPPS for acute care hospital 
operating costs, hospitals located in Puerto Rico are paid for 
operating costs under a special payment formula. Effective October 
1, 2004, in accordance with section 504 of Public Law 108-173, the 
methodology for operating payments made to hospitals located in 
Puerto Rico under the IPPS was revised to make payments based on a 
blend of 25 percent of the applicable standardized amount specific 
to Puerto Rico hospitals and 75 percent of the applicable national 
average standardized amount. In conjunction with this change to the 
operating blend percentage, effective with discharges occurring on 
or after October 1, 2004, we also revised the methodology for 
computing capital payments made to hospitals located in Puerto Rico 
to be based on a blend of 25 percent of the Puerto Rico capital rate 
and 75 percent of the national capital Federal rate (69 FR 49185).

A. Determination of the Proposed Federal Hospital Inpatient 
Capital-Related Prospective Payment Rate Update

    In the discussion that follows, we explain the factors that we 
used to determine the proposed capital Federal rate for FY 2016. In 
particular, we explain why the proposed FY 2016 capital Federal rate 
increases approximately 0.8 percent, compared to the FY 2015 capital 
Federal rate. As discussed in the impact analysis in Appendix A to 
this proposed rule, we estimate that capital payments per discharge 
would increase approximately 2.0 percent during that same period. 
Because capital payments constitute about 10 percent of hospital 
payments, a percent change in the capital Federal rate yields only 
about a 0.1 percent change in actual payments to hospitals.

1. Projected Capital Standard Federal Rate Update

a. Description of the Update Framework

    Under Sec.  412.308(c)(1), the capital standard Federal rate is 
updated on the basis of an analytical framework that takes into 
account changes in a capital input price index (CIPI) and several 
other policy adjustment factors. Specifically, we adjust the 
projected CIPI rate-of-increase as appropriate each year for case-
mix index-related changes, for intensity, and for errors in previous 
CIPI forecasts. The proposed update factor for FY 2016 under that 
framework is 1.3 percent based on the best data available at this 
time. The proposed update factor under that framework is based on a 
projected 1.3 percent increase in the FY 2010-based CIPI, a 0.0 
percentage point adjustment for intensity, a 0.0 percentage point 
adjustment for case-mix, a 0.0 percentage point adjustment for the 
DRG reclassification and recalibration, and a forecast error 
correction of 0.0 percentage point. As discussed below in section 
III.C. of this Addendum, we continue to believe that the CIPI is the 
most appropriate input price index for capital costs to measure 
capital price changes in a given year. We also explain the basis for 
the FY 2016 CIPI projection in that same section of this Addendum. 
Below we describe the policy adjustments that we are proposing to 
apply in the update framework for FY 2016.
    The case-mix index is the measure of the average DRG weight for 
cases paid under the IPPS. Because the DRG weight determines the 
prospective payment for each case, any percentage increase in the 
case-mix index corresponds to an equal percentage increase in 
hospital payments.
    The case-mix index can change for any of several reasons:
     The average resource use of Medicare patients changes 
(``real'' case-mix change);
     Changes in hospital documentation and coding of patient 
records result in higher-weighted DRG assignments (``coding 
effects''); and
     The annual DRG reclassification and recalibration 
changes may not be budget neutral (``reclassification effect'').
    We define real case-mix change as actual changes in the mix (and 
resource requirements) of Medicare patients as opposed to changes in 
documentation and coding behavior that result in assignment of cases 
to higher-weighted DRGs, but do not reflect higher resource 
requirements. The capital update framework includes the same case-
mix index adjustment used in the former operating IPPS update 
framework (as discussed in the May 18, 2004 IPPS proposed rule for 
FY 2005 (69 FR 28816)). (We no longer use an update framework to 
make a recommendation for updating the operating IPPS standardized 
amounts as discussed in section II. of Appendix B to the FY 2006 
IPPS final rule (70 FR 47707).)
    For FY 2016, we are projecting a 0.5 percent total increase in 
the case-mix index. We estimated that the real case-mix increase 
will also equal 0.5 percent for FY 2016. The proposed net adjustment 
for change in case-mix is the difference between the projected real 
increase in case-mix and the projected

[[Page 24639]]

total increase in case-mix. Therefore, the proposed net adjustment 
for case-mix change in FY 2016 is 0.0 percentage point.
    The capital update framework also contains an adjustment for the 
effects of DRG reclassification and recalibration. This adjustment 
is intended to remove the effect on total payments of prior year's 
changes to the DRG classifications and relative weights, in order to 
retain budget neutrality for all case-mix index-related changes 
other than those due to patient severity of illness. Due to the lag 
time in the availability of data, there is a 2-year lag in data used 
to determine the adjustment for the effects of DRG reclassification 
and recalibration. For example, we have data available to evaluate 
the effects of the FY 2014 DRG reclassification and recalibration as 
part of our update for FY 2016. We estimate that FY 2014 DRG 
reclassification and recalibration resulted in no change in the 
case-mix when compared with the case-mix index that would have 
resulted if we had not made the reclassification and recalibration 
changes to the DRGs. Therefore, we are proposing to make a 0.0 
percentage point adjustment for reclassification and recalibration 
in the update framework for FY 2016.
    The capital update framework also contains an adjustment for 
forecast error. The input price index forecast is based on 
historical trends and relationships ascertainable at the time the 
update factor is established for the upcoming year. In any given 
year, there may be unanticipated price fluctuations that may result 
in differences between the actual increase in prices and the 
forecast used in calculating the update factors. In setting a 
prospective payment rate under the framework, we make an adjustment 
for forecast error only if our estimate of the change in the capital 
input price index for any year is off by 0.25 percentage point or 
more. There is a 2-year lag between the forecast and the 
availability of data to develop a measurement of the forecast error. 
A forecast error of 0.0 percentage point is calculated for the 
proposed FY 2016 update. Historically, when a forecast error of the 
CIPI is greater than 0.25 percentage point in absolute terms, it is 
reflected in the update recommended under this framework. A forecast 
error of 0.0 percentage point was calculated for the FY 2014 update. 
That is, current historical data indicate that the forecasted FY 
2014 CIPI (1.2 percent) used in calculating the FY 2014 update 
factor was equal to the actual realized price increases (also 1.2 
percent). Therefore, we are not proposing to make an adjustment for 
a forecast error in the update for FY 2016.
    Under the capital IPPS update framework, we also make an 
adjustment for changes in intensity. Historically, we calculated 
this adjustment using the same methodology and data that were used 
in the past under the framework for operating IPPS. The intensity 
factor for the operating update framework reflected how hospital 
services are utilized to produce the final product, that is, the 
discharge. This component accounts for changes in the use of 
quality-enhancing services, for changes within DRG severity, and for 
expected modification of practice patterns to remove noncost-
effective services. Our intensity measure is based on a 5-year 
average.
    We calculate case-mix constant intensity as the change in total 
cost per discharge, adjusted for price level changes (the CIPI for 
hospital and related services) and changes in real case-mix. Without 
reliable estimates of the proportions of the overall annual 
intensity increases that are due, respectively, to ineffective 
practice patterns and the combination of quality-enhancing new 
technologies and complexity within the DRG system, we assume that 
one-half of the annual increase is due to each of these factors. The 
capital update framework thus provides an add-on to the input price 
index rate of increase of one-half of the estimated annual increase 
in intensity, to allow for increases within DRG severity and the 
adoption of quality-enhancing technology.
    In this proposed rule, we are proposing to continue to use a 
Medicare-specific intensity measure that is based on a 5-year 
adjusted average of cost per discharge for FY 2016 (we refer readers 
to the FY 2011 IPPS/LTCH PPS final rule (75 FR 50436) for a full 
description of our Medicare-specific intensity measure). 
Specifically, for FY 2016, we are proposing to use an intensity 
measure that is based on an average of cost per discharge data from 
the 5-year period beginning with FY 2009 and extending through FY 
2013. Based on these data, we estimated that case-mix constant 
intensity declined during FYs 2009 through 2013. In the past, when 
we found intensity to be declining, we believed a zero (rather than 
a negative) intensity adjustment was appropriate. Consistent with 
this approach, because we estimate that intensity declined during 
that 5-year period, we believe it is appropriate to propose to 
continue to apply a zero intensity adjustment for FY 2016. 
Therefore, we are proposing to make a 0.0 percentage point 
adjustment for intensity in the update for FY 2016.
    Above, we described the basis of the components used to develop 
the proposed 1.3 percent capital update factor under the capital 
update framework for FY 2016 as shown in the table below.

     Proposed CMS FY 2016 Update Factor to the Capital Federal Rate
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Capital Input Price Index *.....................................     1.3
Intensity:......................................................     0.0
Case-Mix Adjustment Factors:
    Real Across DRG Change......................................    -0.5
    Projected Case-Mix Change...................................     0.5
                                                                 -------
    Subtotal....................................................     1.3
Effect of FY 2014 Reclassification and Recalibration............     0.0
                                                                 -------
Forecast Error Correction.......................................     0.0
    Total Update................................................     1.3
------------------------------------------------------------------------
* The capital input price index is based on the FY 2010-based CIPI.

b. Comparison of CMS and MedPAC Update Recommendation

    In its March 2015 Report to Congress, MedPAC did not make a 
specific update recommendation for capital IPPS payments for FY 
2016. (We refer readers to MedPAC's Report to the Congress: Medicare 
Payment Policy, March 2015, Chapter 3, available on the Web site at: 
http://www.medpac.gov.)

2. Proposed Outlier Payment Adjustment Factor

    Section 412.312(c) establishes a unified outlier payment 
methodology for inpatient operating and inpatient capital-related 
costs. A single set of thresholds is used to identify outlier cases 
for both inpatient operating and inpatient capital-related payments. 
Section 412.308(c)(2) provides that the standard Federal rate for 
inpatient capital-related costs be reduced by an adjustment factor 
equal to the estimated proportion of capital-related outlier 
payments to total inpatient capital-related PPS payments. The 
outlier thresholds are set so that operating outlier payments are 
projected to be 5.1 percent of total operating IPPS DRG payments.
    For FY 2015, we estimated that outlier payments for capital will 
equal 6.18 percent of inpatient capital-related payments based on 
the capital Federal rate in FY 2015. Based on the proposed 
thresholds as set forth in section II.A. of this Addendum, we 
estimate that outlier payments for capital-related costs would equal 
6.43 percent for inpatient capital-related payments based on the 
proposed capital Federal rate in FY 2016. Therefore, we are 
proposing to apply an outlier adjustment factor of 0.9357 in 
determining the proposed capital Federal rate for FY 2016. Thus, we 
estimate that the percentage of capital outlier payments to total 
capital Federal rate payments for FY 2016 will be higher than the 
percentage for FY 2015.
    The outlier reduction factors are not built permanently into the 
capital rates; that is, they are not applied cumulatively in 
determining the capital Federal rate. The proposed FY 2016 outlier 
adjustment of 0.9357 is a -0.27 percent change from the FY 2015 
outlier adjustment of 0.9382. Therefore, the proposed net change in 
the outlier adjustment to the capital Federal rate for FY 2016 is 
0.9973 (0.9357/0.9382). Thus, the outlier adjustment would decrease 
the proposed FY 2016 capital Federal rate by 0.27 percent compared 
to the FY 2015 outlier adjustment.

3. Proposed Budget Neutrality Adjustment Factor for Changes in DRG 
Classifications and Weights and the GAF

    Section 412.308(c)(4)(ii) requires that the capital Federal rate 
be adjusted so that aggregate payments for the fiscal year based on 
the capital Federal rate after any changes resulting from the annual 
DRG reclassification and recalibration and changes in the GAF are 
projected to equal aggregate payments that would have been made on 
the basis of the capital Federal rate without such changes. Because 
we implemented a separate GAF for Puerto Rico, we apply separate 
budget neutrality adjustments for the national GAF and the Puerto 
Rico GAF. We apply the same budget neutrality factor for DRG 
reclassifications and recalibration nationally and for Puerto Rico. 
Separate adjustments were unnecessary for FY 1998 and earlier 
because the GAF for Puerto Rico was implemented in FY 1998.

[[Page 24640]]

    To determine the proposed factors for FY 2016, we compared 
(separately for the national capital rate and the Puerto Rico 
capital rate) estimated aggregate capital Federal rate payments 
based on the FY 2015 MS-DRG classifications and relative weights and 
the FY 2015 GAF to estimated aggregate capital Federal rate payments 
based on the FY 2015 MS-DRG classifications and relative weights and 
the proposed FY 2016 GAFs. To achieve budget neutrality for the 
changes in the national GAFs, based on calculations using updated 
data, we are proposing to apply an incremental budget neutrality 
adjustment factor of 0.9982 for FY 2016 to the previous cumulative 
FY 2015 adjustment factor of 0.9884, yielding a proposed adjustment 
factor of 0.9867 through FY 2016. For the Puerto Rico GAFs, we are 
proposing to apply an incremental budget neutrality adjustment 
factor of 0.9980 for FY 2016 to the previous cumulative FY 2015 
adjustment factor of 1.0082, yielding a proposed cumulative 
adjustment factor of 1.0062 through FY 2016.
    We then compared estimated aggregate capital Federal rate 
payments based on the FY 2015 MS-DRG relative weights and the 
proposed FY 2016 GAFs to estimated aggregate capital Federal rate 
payments based on the cumulative effects of the proposed FY 2016 MS-
DRG classifications and relative weights and the proposed FY 2016 
GAFs. The proposed incremental adjustment factor for DRG 
classifications and changes in relative weights is 0.9994 both 
nationally and for Puerto Rico. The proposed cumulative adjustment 
factors for MS-DRG classifications and changes in relative weights 
and for changes in the GAFs through FY 2016 are 0.9861 nationally 
and 1.0056 for Puerto Rico. (We note that all the values are 
calculated with unrounded numbers.) The GAF/DRG budget neutrality 
adjustment factors are built permanently into the capital rates; 
that is, they are applied cumulatively in determining the capital 
Federal rate. This follows the requirement under Sec.  
412.308(c)(4)(ii) that estimated aggregate payments each year be no 
more or less than they would have been in the absence of the annual 
DRG reclassification and recalibration and changes in the GAFs.
    The methodology used to determine the recalibration and 
geographic adjustment factor (GAF/DRG) budget neutrality adjustment 
is similar to the methodology used in establishing budget neutrality 
adjustments under the IPPS for operating costs. One difference is 
that, under the operating IPPS, the budget neutrality adjustments 
for the effect of geographic reclassifications are determined 
separately from the effects of other changes in the hospital wage 
index and the MS-DRG relative weights. Under the capital IPPS, there 
is a single GAF/DRG budget neutrality adjustment factor (the 
national capital rate and the Puerto Rico capital rate are 
determined separately) for changes in the GAF (including geographic 
reclassification) and the MS-DRG relative weights. In addition, 
there is no adjustment for the effects that geographic 
reclassification has on the other payment parameters, such as the 
payments for DSH or IME.
    The proposed cumulative adjustment factor accounts for the 
proposed MS-DRG reclassifications and recalibration and for proposed 
changes in the GAFs. It also incorporates the effects on the 
proposed GAFs of FY 2016 geographic reclassification decisions made 
by the MGCRB compared to FY 2015 decisions. However, it does not 
account for proposed changes in payments due to changes in the DSH 
and IME adjustment factors.

4. Proposed Capital Federal Rate for FY 2016

    For FY 2015, we established a capital Federal rate of $434.97 
(79 FR 59684). We are proposing to establish an update of 1.3 
percent in determining the FY 2016 capital Federal rate for all 
hospitals. As a result of this proposed update and the proposed 
budget neutrality factors discussed above, we are proposing to 
establish a national capital Federal rate of $438.40 for FY 2016. 
The proposed national capital Federal rate for FY 2016 was 
calculated as follows:
     The proposed FY 2016 update factor is 1.0013, that is, 
the proposed update is 1.3 percent.
     The proposed FY 2016 budget neutrality adjustment 
factor that is applied to the proposed capital Federal rate for 
proposed changes in the MS-DRG classifications and relative weights 
and changes in the GAFs is 0.9976.
     The proposed FY 2016 outlier adjustment factor is 
0.9357.
    (We note that, as discussed in section VI.C. of the preamble of 
this proposed rule, we are not proposing to make an additional MS-
DRG documentation and coding adjustment to the capital IPPS Federal 
rates for FY 2016.)
    Because the proposed FY 2016 capital Federal rate has already 
been adjusted for differences in case-mix, wages, cost-of-living, 
indirect medical education costs, and payments to hospitals serving 
a disproportionate share of low-income patients, we are not 
proposing to make additional adjustments in the capital Federal rate 
for these factors, other than the proposed budget neutrality factor 
for proposed changes in the MS-DRG classifications and relative 
weights and for proposed changes in the GAFs.
    We are providing the following chart that shows how each of the 
proposed factors and adjustments for FY 2016 affects the computation 
of the proposed FY 2016 national capital Federal rate in comparison 
to the FY 2015 national capital Federal rate. The proposed FY 2016 
update factor has the effect of increasing the capital Federal rate 
by 1.3 percent compared to the FY 2015 capital Federal rate. The 
proposed GAF/DRG budget neutrality adjustment factor has the effect 
of decreasing the capital Federal rate by 0.24 percent. The proposed 
FY 2016 outlier adjustment factor has the effect of decreasing the 
capital Federal rate by 0.27 percent compared to the FY 2015 capital 
Federal rate. The combined effect of all the proposed changes would 
increase the proposed national capital Federal rate by 0.79 percent 
compared to the FY 2015 national capital Federal rate.

  Comparison of Factors and Adjustments: FY 2015 Capital Federal Rate and Proposed FY 2016 Capital Federal Rate
----------------------------------------------------------------------------------------------------------------
                                                                    Proposed FY
                                                      FY 2015          2016           Change      Percent change
----------------------------------------------------------------------------------------------------------------
Update Factor \1\...............................          1.0150          1.0130          1.0130             1.3
GAF/DRG Adjustment Factor \1\...................          0.9993          0.9976          0.9976           -0.24
Outlier Adjustment Factor \2\...................          0.9382          0.9357          0.9973           -0.27
Capital Federal Rate............................         $434.97         $438.40           .0079            0.79
----------------------------------------------------------------------------------------------------------------
\1\ The proposed update factor and the proposed GAF/DRG budget neutrality adjustment factors are built
  permanently into the capital Federal rates. Thus, for example, the proposed incremental change from FY 2015 to
  FY 2016 resulting from the application of the proposed 0.9976 GAF/DRG budget neutrality adjustment factor for
  FY 2016 is a proposed net change of 0.9976 (or -0.24 percent).
\2\ The proposed outlier reduction factor is not built permanently into the capital Federal rate; that is, the
  factor is not applied cumulatively in determining the proposed capital Federal rate. Thus, for example, the
  proposed net change resulting from the application of the proposed FY 2016 outlier adjustment factor is 0.9357/
  0.9382, or 0.9973 (or -0.27 percent).

5. Proposed Special Capital Rate for Puerto Rico Hospitals

    Section 412.374 provides for the use of a blended payment system 
for payments made to hospitals located in Puerto Rico under the PPS 
for acute care hospital inpatient capital-related costs. 
Accordingly, under the capital PPS, we compute a separate payment 
rate specific to hospitals located in Puerto Rico using the same 
methodology used to compute the national Federal rate for capital-
related costs. Under the broad authority of section 1886(g) of the 
Act, beginning with discharges occurring on or after October 1, 
2004, capital payments made to hospitals located in Puerto Rico are 
based on a blend of 25 percent of the Puerto Rico capital rate and 
75 percent of the capital Federal rate. The Puerto Rico

[[Page 24641]]

capital rate is derived from the costs of Puerto Rico hospitals 
only, while the capital Federal rate is derived from the costs of 
all acute care hospitals participating in the IPPS (including Puerto 
Rico).
    To adjust hospitals' capital payments for geographic variations 
in capital costs, we apply a GAF to both portions of the blended 
capital rate. The GAF is calculated using the operating IPPS wage 
index, and varies depending on the labor market area or rural area 
in which the hospital is located. We use the Puerto Rico wage index 
to determine the GAF for the Puerto Rico part of the capital-blended 
rate and the national wage index to determine the GAF for the 
national part of the blended capital rate.
    Because we implemented a separate GAF for Puerto Rico in FY 
1998, we also apply separate budget neutrality adjustment factors 
for the national GAF and for the Puerto Rico GAF. However, we apply 
the same budget neutrality adjustment factor for MS-DRG 
reclassifications and recalibration nationally and for Puerto Rico. 
The proposed budget neutrality adjustment factors for the national 
GAF and for the Puerto Rico GAF and the proposed budget neutrality 
factor for MS-DRG reclassifications and recalibration (which is the 
same nationally and for Puerto Rico) are discussed in section 
III.A.3. of this Addendum.
    In computing the payment for a particular Puerto Rico hospital, 
the Puerto Rico portion of the capital rate (25 percent) is 
multiplied by the Puerto Rico-specific GAF for the labor market area 
in which the hospital is located, and the national portion of the 
capital rate (75 percent) is multiplied by the national GAF for the 
labor market area in which the hospital is located (which is 
computed from national data for all hospitals in the United States 
and Puerto Rico).
    For FY 2015, the special capital rate for hospitals located in 
Puerto Rico was $209.45 (79 FR 59683). With the changes we are 
proposing to make to the factors used to determine the proposed 
capital Federal rate, the proposed FY 2016 special capital rate for 
hospitals in Puerto Rico is $213.77.

B. Calculation of the Proposed Inpatient Capital-Related 
Prospective Payments for FY 2016

    For purposes of calculating payments for each discharge during 
FY 2016, the capital Federal rate is adjusted as follows: (Standard 
Federal Rate) x (DRG weight) x (GAF) x (COLA for hospitals located 
in Alaska and Hawaii) x (1 + DSH Adjustment Factor + IME Adjustment 
Factor, if applicable). The result is the adjusted capital Federal 
rate.
    Hospitals also may receive outlier payments for those cases that 
qualify under the thresholds established for each fiscal year. 
Section 412.312(c) provides for a single set of thresholds to 
identify outlier cases for both inpatient operating and inpatient 
capital-related payments. The proposed outlier thresholds for FY 
2016 are in section II.A. of this Addendum. For FY 2016, a case 
would qualify as a cost outlier if the cost for the case plus the 
(operating) IME and DSH payments (including both the empirically 
justified Medicare DSH payment and the estimated uncompensated care 
payment, as discussed in section II.A.4.g.(1) of this Addendum) is 
greater than the prospective payment rate for the MS-DRG plus the 
proposed fixed-loss amount of $24,485.
    Currently, as provided under Sec.  412.304(c)(2), we pay a new 
hospital 85 percent of its reasonable costs during the first 2 years 
of operation unless it elects to receive payment based on 100 
percent of the capital Federal rate. Effective with the third year 
of operation, we pay the hospital based on 100 percent of the 
capital Federal rate (that is, the same methodology used to pay all 
other hospitals subject to the capital PPS).

C. Capital Input Price Index

1. Background

    Like the operating input price index, the capital input price 
index (CIPI) is a fixed-weight price index that measures the price 
changes associated with capital costs during a given year. The CIPI 
differs from the operating input price index in one important 
aspect--the CIPI reflects the vintage nature of capital, which is 
the acquisition and use of capital over time. Capital expenses in 
any given year are determined by the stock of capital in that year 
(that is, capital that remains on hand from all current and prior 
capital acquisitions). An index measuring capital price changes 
needs to reflect this vintage nature of capital. Therefore, the CIPI 
was developed to capture the vintage nature of capital by using a 
weighted-average of past capital purchase prices up to and including 
the current year.
    We periodically update the base year for the operating and 
capital input price indexes to reflect the changing composition of 
inputs for operating and capital expenses. In the FY 2014 IPPS/LTCH 
PPS final rule (78 FR 50603 through 50607), we rebased and revised 
the CIPI to a FY 2010 base year to reflect the more current 
structure of capital costs in hospitals. For a complete discussion 
of this rebasing, we refer readers to the FY 2014 IPPS/LTCH PPS 
final rule.

2. Forecast of the CIPI for FY 2016

    Based on the latest forecast by IHS Global Insight, Inc. (first 
quarter of 2015), we are forecasting the FY 2010-based CIPI to 
increase 1.3 percent in FY 2016. This reflects a projected 1.8 
percent increase in vintage-weighted depreciation prices (building 
and fixed equipment, and movable equipment), and a projected 2.6 
percent increase in other capital expense prices in FY 2016, 
partially offset by a projected 1.2 percent decline in vintage-
weighted interest expense prices in FY 2016. The weighted average of 
these three factors produces the forecasted 1.3 percent increase for 
the FY 2010-based CIPI as a whole in FY 2016.

IV. Proposed Changes to Payment Rates for Excluded Hospitals: Proposed 
Rate-of-Increase Percentages for FY 2016

    Payments for services furnished in children's hospitals, 11 
cancer hospitals, and hospitals located outside the 50 States, the 
District of Columbia and Puerto Rico (that is, short-term acute care 
hospitals located in the U.S. Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa) that are excluded from the IPPS 
are made on the basis of reasonable costs based on the hospital's 
own historical cost experience, subject to a rate-of-increase 
ceiling. A per discharge limit (the target amount as defined in 
Sec.  413.40(a) of the regulations) is set for each hospital based 
on the hospital's own cost experience in its base year, and updated 
annually by a rate-of-increase percentage. (We note that, in 
accordance with Sec.  403.752(a), RNHCIs are also subject to the 
rate-of-increase limits established under Sec.  413.40 of the 
regulations.)
    In this proposed rule, the FY 2016 rate-of-increase percentage 
for updating the target amounts for the 11 cancer hospitals, 
children's hospitals, the short-term acute care hospitals located in 
the U.S. Virgin Islands, Guam, the Northern Mariana Islands, and 
American Samoa, and RNHCIs is the estimated percentage increase in 
the FY 2016 IPPS operating market basket, in accordance with 
applicable regulations at Sec.  413.40. Based on IHS Global Insight, 
Inc.'s 2015 first quarter forecast, we estimate that the FY 2010-
based IPPS operating market basket update for FY 2016 is 2.7 percent 
(that is, the estimate of the market basket rate-of-increase). 
However, we are proposing that if more recent data become available 
for the final rule, we would use them to calculate the IPPS 
operating market basket update for FY 2016.
    The IRF PPS, the IPF PPS, and the LTCH PPS are updated annually. 
We refer readers to section VII. of the preamble of this proposed 
rule and section V. of the Addendum to this proposed rule for the 
proposed update changes to the Federal payment rates for LTCHs under 
the LTCH PPS for FY 2016. The annual updates for the IRF PPS and the 
IPF PPS are issued by the agency in separate Federal Register 
documents.

V. Proposed Updates to the Payment Rates for the LTCH PPS for FY 2016

A. Proposed LTCH PPS Standard Federal Rate for FY 2016

1. Background

    In section VII. of the preamble of this proposed rule, we 
discuss our proposed updates to the payment rates, factors, and 
specific policies under the LTCH PPS for FY 2016.
    Under Sec.  412.523(c)(3)(ii) of the regulations, for LTCH PPS 
rate years beginning RY 2004 through RY 2006, we updated the 
standard Federal rate annually by a factor to adjust for the most 
recent estimate of the increases in prices of an appropriate market 
basket of goods and services for LTCHs. We established this policy 
of annually updating the standard Federal rate because, at that 
time, we believed that was the most appropriate method for updating 
the LTCH PPS standard Federal rate for years after the initial 
implementation of the LTCH PPS in FY 2003. Therefore, under Sec.  
412.523(c)(3)(ii), for RYs 2004 through 2006, the annual update to 
the LTCH PPS standard Federal rate was equal to the previous rate 
year's Federal rate updated by the most recent estimate of increases 
in the appropriate market basket of goods and services included in 
covered inpatient LTCH services.

[[Page 24642]]

    In determining the annual update to the standard Federal rate 
for RY 2007, based on our ongoing monitoring activity, we believed 
that, rather than solely using the most recent estimate of the LTCH 
PPS market basket update as the basis of the annual update factor, 
it was appropriate to adjust the standard Federal rate to account 
for the effect of documentation and coding in a prior period that 
was unrelated to patients' severity of illness (71 FR 27818). 
Accordingly, we established under Sec.  412.523(c)(3)(iii) that the 
annual update to the standard Federal rate for RY 2007 was zero 
percent based on the most recent estimate of the LTCH PPS market 
basket at that time, offset by an adjustment to account for changes 
in case-mix in prior periods due to the effect of documentation and 
coding that were unrelated to patients' severity of illness. For RY 
2008 through FY 2011, we also made an adjustment to account for the 
effect of documentation and coding that was unrelated to patients' 
severity of illness in establishing the annual update to the 
standard Federal rate as set forth in the regulations at Sec.  
412.523(c)(3)(iv) through (c)(3)(vii). For FYs 2012, 2013, 2014, and 
2015, we updated the standard Federal rate by the most recent 
estimate of the LTCH PPS market basket at that time, including 
additional statutory adjustments required by section 1886(m)(3)(A) 
of the Act as set forth in the regulations at Sec.  
412.523(c)(3)(viii) through (c)(3)(ix).
    Section 1886(m)(3)(A) of the Act, as added by section 3401(c) of 
the Affordable Care Act, specifies that, for rate year 2010 and each 
subsequent rate year, any annual update to the standard Federal rate 
shall be reduced:
     For rate year 2010 through 2019, by the other 
adjustment specified in section 1886(m)(3)(A)(ii) and (m)(4) of the 
Act; and
     For rate year 2012 and each subsequent year, by the 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) 
of the Act (which we refer to as ``the multifactor productivity 
(MFP) adjustment'') as discussed in section VII.D.2. of the preamble 
of this proposed rule.
    Section 1886(m)(3)(B) of the Act provides that the application 
of paragraph (3) of section 1886(m) of the Act may result in the 
annual update being less than zero for a rate year, and may result 
in payment rates for a rate year being less than such payment rates 
for the preceding rate year. (As noted in section VII.D.2.a. of the 
preamble of this proposed rule, the annual update to the LTCH PPS 
occurs on October 1 and we have adopted the term ``fiscal year'' 
(FY) rather than ``rate year'' (RY) under the LTCH PPS beginning 
October 1, 2010. Therefore, for purposes of clarity, when discussing 
the annual update for the LTCH PPS, including the provisions of the 
Affordable Care Act, we use the term ``fiscal year'' rather than 
``rate year'' for 2011 and subsequent years.)
    For FY 2015, consistent with our historical practice, we 
established an update to the LTCH PPS standard Federal rate based on 
the full estimated LTCH PPS market basket increase of 2.9 percent 
and the 0.7 percentage point reductions required by sections 
1886(m)(3)(A)(i) and 1886(m)(3)(A)(ii) with 1886(m)(4)(E) of the 
Act. Accordingly, at Sec.  412.523(c)(3)(xi) of the regulations, we 
established an annual update of 2.2 percent to the standard Federal 
rate for FY 2015 (79 FR 50391through 50392).
    For FY 2016, as discussed in greater detail in section VII.D.2. 
of the preamble of this proposed rule, we are proposing to establish 
an annual update to the LTCH PPS standard Federal payment rate based 
on the full estimated increase in the LTCH PPS market basket, less 
the MFP adjustment consistent with section 1886(m)(3)(A)(i) of the 
Act, and less the 0.2 percentage point required by sections 
1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. In addition, as 
discussed in greater detail in section VII.D.2. of the preamble of 
this proposed rule, the annual update will be further reduced by 2.0 
percentage points for LTCHs that fail to submit quality reporting 
data in accordance with the requirements of the LTCH QRP under 
section 1886(m)(5) of the Act.
    Specifically, in this proposed rule, based on the best available 
data, we are proposing to establish an annual update to the standard 
Federal rate of 1.9 percent, which is based on the full estimated 
increase in the LTCH PPS market basket of 2.7 percent, less the 
proposed MFP adjustment of 0.6 percentage point consistent with 
section 1886(m)(3)(A)(i) of the Act, and less the 0.2 percentage 
point required by sections 1886(m)(3)(A)(ii) and (m)(4)(E) of the 
Act. For LTCHs that fail to submit the required quality reporting 
data for FY 2016 in accordance with the LTCH QRP, the proposed 
annual update is further reduced by 2.0 percentage points as 
required by section 1886(m)(5) of the Act (as discussed in greater 
detail in section VII.D.2.c. of the preamble of this proposed rule). 
Accordingly, we are proposing to establish an annual update to the 
LTCH PPS standard Federal rate of -0.1 percent for LTCHs that fail 
to submit the required quality reporting data for FY 2016. This 
proposed -0.1 percent update is calculated based on the full 
estimated increase in the LTCH PPS market basket of 2.7 percent, 
less a proposed MFP adjustment of 0.6 percentage point, less an 
additional adjustment of 0.2 percentage point required by the 
statute, and less 2.0 percentage points for failure to submit 
quality reporting data as required by section 1886(m)(5) of the Act.

2. Development of the Proposed FY 2016 LTCH PPS Standard Federal 
Payment Rate

    We continue to believe that the annual update to the LTCH PPS 
standard Federal payment rate should be based on the most recent 
estimate of the increase in the LTCH PPS market basket, including 
any statutory adjustments. Consistent with our historical practice, 
for FY 2016, we are proposing to apply the annual update to the LTCH 
PPS standard Federal rate from the previous year. Furthermore, in 
determining the proposed LTCH PPS standard Federal payment rate for 
FY 2016, we also are proposing to make certain regulatory 
adjustments, consistent with past practices. Specifically, in 
determining the proposed FY 2016 LTCH PPS standard Federal payment 
rate, we are proposing to apply a budget neutrality adjustment 
factor for the proposed changes related to the proposed area wage 
adjustment (that is, proposed changes to the wage data and proposed 
labor-related share) in accordance with Sec.  412.523(d)(4). We also 
are proposing that if more recent data become available, we would 
use that data, if appropriate, to determine the update to the LTCH 
PPS standard Federal payment rate for FY 2016 in the final rule.
    For FY 2015, we established an annual update to the LTCH PPS 
standard Federal rate of 2.2 percent for FY 2015 based on the full 
estimated LTCH PPS market basket increase of 2.9 percent, less the 
MFP adjustment of 0.5 percentage point consistent with section 
1886(m)(3)(A)(i) of the Act and less the 0.2 percentage point 
required by sections 1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. 
Accordingly, at Sec.  412.523(c)(3)(xi), we established an annual 
update to the standard Federal rate for FY 2015 of 2.2 percent. That 
is, we applied an update factor of 1.022 to the FY 2014 Federal rate 
of $40,607.31 to determine the FY 2015 standard Federal rate. The 
standard Federal rate for FY 2015 was further adjusted by an 
adjustment factor of 0.98734 for FY 2015 under the final year of the 
3-year phase-in of the one-time prospective adjustment at Sec.  
412.523(d)(3)(ii). We also applied an area wage level budget 
neutrality factor for FY 2015 of 1.0016703 to the standard Federal 
rate to ensure that any changes to the area wage level adjustment 
would not result in any change in estimated aggregate LTCH PPS 
payments. Consequently, we established a standard Federal rate for 
FY 2015 of $41,043.71 (calculated as $40,607.31 x 1.022 x 0.98734 x 
1.001670) (79 FR 50392).
    In this proposed rule, we are proposing to establish an annual 
update to the LTCH PPS standard Federal payment rate of 1.9 percent, 
which was determined using the methodology previously described. 
Therefore, consistent with our proposal, under proposed Sec.  
412.523(c)(3)(xii), we are proposing to apply a factor of 1.019 to 
the FY 2015 standard Federal rate of $41,043.71 to determine the 
proposed FY 2016 LTCH PPS standard Federal payment rate. These 
proposed factors are based on IGI's first quarter 2015 forecast, 
which are the best available data at this time. For LTCHs that fail 
to submit quality reporting data for FY 2016 under the LTCH QRP, 
consistent with our proposal, under proposed Sec.  
412.523(c)(3)(xii), applied in conjunction with the provisions of 
Sec.  412.523(c)(4), we are proposing to reduce the annual update to 
the LTCH PPS standard Federal payment rate by an additional 2.0 
percentage points consistent with section 1886(m)(5) of the Act. In 
those cases, the LTCH PPS standard Federal payment rate would be 
updated by -0.1 percent (that is, a proposed update factor of 0.999) 
for FY 2016 for LTCHs that fail to submit the required quality 
reporting data for FY 2016 as required under the LTCH QRP. 
Consistent with Sec.  412.523(d)(4), we also are proposing to apply 
a proposed area wage level budget neutrality factor to the FY 2016 
standard Federal rate of 1.001444, which was determined using the 
methodology previously described. We are proposing to apply this 
area wage level budget neutrality factor to the FY 2016 LTCH PPS 
standard Federal payment rate to ensure that any changes to the area 
wage level adjustment

[[Page 24643]]

(that is, the annual update of the wage index values and labor-
related share) will not result in any change (increase or decrease) 
in estimated aggregate LTCH PPS standard Federal payment rate 
payments. Accordingly, we are proposing to establish a LTCH PPS 
standard Federal payment rate of $41,883.93 (calculated as 
$41,043.71 x 1.019 x 1.001444) for FY 2016. For LTCHs that fail to 
submit quality reporting data for FY 2016 in accordance with the 
requirements of the LTCHQRP under section 1886(m)(5) of the Act, we 
are proposing to establish a LTCH PPS standard Federal payment rate 
of $41,061.87 (calculated as $41,043.71 x 0.999 x 1.001444) for FY 
2016. Consistent with our historical practice, we are proposing that 
if more recent data is available, we would use such data to 
calculate the standard Federal rates for FY 2016 in the final rule. 
We note, as discussed in section VII.B. of the preamble to this 
proposed rule, under our proposed application of the site neutral 
payment rate required under section 1886(m)(6) of the Act, this LTCH 
PPS standard Federal payment rate would only be used to determine 
payments for LTCH PPS standard Federal payment rate cases (that is, 
those LTCH PPS cases that meet the statutory criteria to be excluded 
from the site neutral payment rate).

B. Proposed Adjustment for Area Wage Levels for the LTCH PPS 
Standard Federal Payment Rate for FY 2016

1. Background

    Under the authority of section 123 of the BBRA, as amended by 
section 307(b) of the BIPA, we established an adjustment to the LTCH 
PPS standard Federal rate to account for differences in LTCH area 
wage levels under Sec.  412.525(c). The labor-related share of the 
LTCH PPS standard Federal rate is adjusted to account for geographic 
differences in area wage levels by applying the applicable LTCH PPS 
wage index. The applicable LTCH PPS wage index is computed using 
wage data from inpatient acute care hospitals without regard to 
reclassification under section 1886(d)(8) or section 1886(d)(10) of 
the Act.
    When we implemented the LTCH PPS, we established a 5-year 
transition to the full area wage level adjustment. The area wage 
level adjustment was completely phased-in for cost reporting periods 
beginning in FY 2007. Therefore, for cost reporting periods 
beginning on or after October 1, 2006, the applicable LTCH area wage 
index values are the full LTCH PPS area wage index values calculated 
based on acute care hospital inpatient wage index data without 
taking into account geographic reclassification under section 
1886(d)(8) and section 1886(d)(10) of the Act. For additional 
information on the phase-in of the area wage level adjustment under 
the LTCH PPS, we refer readers to the August 30, 2002 LTCH PPS final 
rule (67 FR 56015 through 56019) and the RY 2008 LTCH PPS final rule 
(72 FR 26891).

2. Proposed Geographic Classifications (Labor Market Areas) for the 
LTCH PPS Standard Federal Payment Rate

    In adjusting for the differences in area wage levels under the 
LTCH PPS, the labor-related portion of an LTCH's Federal prospective 
payment is adjusted by using an appropriate area wage index based on 
the geographic classification (labor market area) in which the LTCH 
is located. Specifically, the application of the LTCH PPS area wage 
level adjustment under existing Sec.  412.525(c) is made based on 
the location of the LTCH--either in an ``urban area,'' or a ``rural 
area,'' as defined in Sec.  412.503. Under Sec.  412.503, an ``urban 
area'' is defined as a Metropolitan Statistical Area (MSAs) (which 
includes a Metropolitan division, where applicable), as defined by 
the Executive OMB and a ``rural area'' is defined as any area 
outside of an urban area.
    The CBSA-based geographic classifications (labor market area 
definitions) currently used under the LTCH PPS, effective for 
discharges occurring on or after October 1, 2014, are based on the 
new OMB labor market area delineations based on the 2010 Decennial 
Census data. We made these revisions because we believe that these 
OMB delineations are based on the best available data that reflect 
the local economies and area wage levels of the hospitals that are 
currently located in these geographic areas. We also believe that 
these OMB delineations will ensure that the LTCH PPS area wage level 
adjustment most appropriately accounts for and reflects the relative 
hospital wage levels in the geographic area of the hospital as 
compared to the national average hospital wage level. We noted that 
this policy was consistent with the IPPS policy adopted in FY 2015 
under Sec.  412.64(b)(1)(ii)(D) of the regulations (79 FR 49951 
through 49963). (For additional information on the CBSA-based labor 
market area (geographic classification) delineations currently used 
under the LTCH PPS and the history of the labor market area 
definitions used under the LTCH PPS, we refer readers to the FY 2015 
IPPS/LTCH PPS final rule (79 FR 50180 through 50185).)
    In general, it is our historical practice to update the CBSA-
based labor market area delineations annually based on the most 
recent updates issued by OMB. At the time of the development of this 
proposed rule, OMB had not issued any further updates subsequent to 
OMB Bulletin No. 13-01, which was dated February 28, 2013, and 
established revised delineations based on 2010 Census Bureau data 
that were subsequently adopted in the FY 2015 IPPS/LTCH PPS final 
rule. (The OMB bulletins are available on the OMB Web site at: 
http://www.whitehouse.gov/omb. Go to ``Information For Agencies'' 
and click on ``Bulletins''.) Therefore, for FY 2016, we are 
proposing to continue to use the CBSA-based labor market area 
delineations currently used under the LTCH PPS (as adopted in the FY 
2015 IPPS/LTCH PPS final rule (79 FR 50180 through 50185)). We 
believe that these CBSA-based labor market area delineations will 
ensure that the LTCH PPS area wage level adjustment most 
appropriately accounts for and reflects the relative hospital wage 
levels in the geographic area of the hospital as compared to the 
national average hospital wage level based on the best available 
data that reflect the local economies and area wage levels of the 
hospitals that are currently located in these geographic areas.

3. Proposed Labor-Related Share for the LTCH PPS Standard Federal 
Payment Rate

    Under the payment adjustment for the differences in area wage 
levels under Sec.  412.525(c), the labor-related share of an LTCH's 
PPS Federal prospective payment is adjusted by the applicable wage 
index for the labor market area in which the LTCH is located. The 
LTCH PPS labor-related share currently represents the sum of the 
labor-related portion of operating costs (Wages and Salaries; 
Employee Benefits; Professional Fees Labor-Related, Administrative 
and Business Support Services; and All-Other: Labor-Related 
Services) and a labor-related portion of capital costs using the 
applicable LTCH PPS market basket. Additional background information 
on the historical development of the labor-related share under the 
LTCH PPS and the development of the RPL market basket can be found 
in the RY 2007 LTCH PPS final rule (71 FR 27810 through 27817 and 
27829 through 27830) and the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51766 through 51769 and 51808).
    For FY 2013, we revised and rebased the market basket used under 
the LTCH PPS by adopting the newly created FY 2009-based LTCH-
specific market basket. In addition, we determined the labor-related 
share for FY 2013 as the sum of the FY 2013 relative importance of 
each labor-related cost category of the FY 2009-based LTCH-specific 
market basket. For more details, we refer readers to the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53477 through 53479). Consistent 
with our historical practice, in the FY 2015 IPPS/LTCH PPS final 
rule (79 FR 50393through 50394), we determined the LTCH PPS labor-
related share for FY 2015 based on the FY 2015 relative importance 
of each labor-related cost category, which reflected the different 
rates of price change for these cost categories between the base 
year (FY 2009) and FY 2015. Specifically, based on IGI's second 
quarter 2014 forecast of the FY 2009-based LTCH-specific market 
basket, we established a labor-related share under the LTCH PPS for 
FY 2015 of 62.306 percent.
    For FY 2016, we are proposing to establish a labor-related share 
for the LTCH PPS standard Federal payment rate payments based on 
IGI's first quarter 2015 forecast of the FY 2009-based LTCH-specific 
market basket. Consistent with our historical practice, we also are 
proposing that if more recent data become available, we would use 
such data, if appropriate, to determine the final FY 2016 labor-
related share. In addition, we are proposing to specify the labor-
related share to one decimal place, which is consistent with the 
IPPS labor-related share and the LTCH market basket update. The 
following table shows the proposed FY 2016 labor-related share 
relative importance using IGI's first quarter 2015 forecast of the 
FY 2009-based LTCH-specific market basket. The sum of the relative 
importance for FY 2016 for operating costs (Wages and Salaries; 
Employee Benefits; Professional Fees Labor-Related, Administrative 
and Business Support Services; and All Other: Labor-Related 
Services) is 58.1 percent. We are proposing to establish that the 
portion of capital-related costs that is influenced by the

[[Page 24644]]

local labor market would continue to be estimated to be 46 percent. 
Because the relative importance for capital-related costs would be 
9.0 percent of the FY 2009-based LTCH-specific market basket in FY 
2016, we are proposing to take 46 percent of 9.0 percent to 
determine the labor-related share of capital-related costs for FY 
2016, which would result in 4.1 percent (0.46 x 9.0). We then added 
that 4.1 percent for the capital-related cost amount to the 58.1 
percent for the operating cost amount to determine the total 
proposed labor-related share for FY 2016. Therefore, under the broad 
authority of section 123 of the BBRA, as amended by section 307(b) 
of BIPA, to determine appropriate payment adjustments under the LTCH 
PPS, we are proposing to establish a labor-related share under the 
LTCH PPS for FY 2016 of 62.2 percent. This proposed labor-related 
share is determined using the same methodology as used in 
calculating all previous fiscal years LTCH labor-related shares.

Proposed FY 2016 Labor-Related Share Relative Importance Based on the FY
                 2009-Based LTCH-Specific Market Basket
------------------------------------------------------------------------
                                                       Proposed FY 2016
                                                         labor-related
                                                        share relative
                                                          importance
------------------------------------------------------------------------
Wages and Salaries..................................                44.8
Employee Benefits...................................                 8.1
Professional Fees: Labor-Related....................                 2.2
Administrative and Business Support Services........                 0.5
All Other: Labor-Related Services...................                 2.5
Subtotal............................................                58.1
Proposed Labor-Related Portion of Capital Costs (46                  4.1
 percent)...........................................
Proposed Total Labor-Related Share..................                62.2
------------------------------------------------------------------------

4. Proposed Wage Index for FY 2016 for the LTCH PPS Standard Federal 
Payment Rate

    Historically, we have established LTCH PPS area wage index 
values calculated from acute care IPPS hospital wage data without 
taking into account geographic reclassification under sections 
1886(d)(8) and 1886(d)(10) of the Act (67 FR 56019). The area wage 
level adjustment established under the LTCH PPS is based on an 
LTCH's actual location without regard to the ``urban'' or ``rural'' 
designation of any related or affiliated provider.
    In the FY 2015 LTCH PPS final rule (79 FR 50394through 50396), 
we calculated the FY 2015 LTCH PPS area wage index values using the 
same data used for the FY 2015 acute care hospital IPPS (that is, 
data from cost reporting periods beginning during FY 2011), without 
taking into account geographic reclassification under sections 
1886(d)(8) and 1886(d)(10) of the Act, as these were the most recent 
complete data available at that time. In that same final rule, we 
indicated that we computed the FY 2015 LTCH PPS area wage index 
values consistent with the urban and rural geographic 
classifications (labor market areas) that were in place at that 
time, and consistent with the pre-reclassified IPPS wage index 
policy (that is, our historical policy of not taking into account 
IPPS geographic reclassifications in determining payments under the 
LTCH PPS). As with the IPPS wage index, wage data for multicampus 
hospitals with campuses located in different labor market areas 
(CBSAs) are apportioned to each CBSA where the campus (or campuses) 
are located. We also continued to use our existing policy for 
determining area wage index values for areas where there are no IPPS 
wage data.
    Consistent with our historical methodology, to determine the 
applicable area wage index values for the FY 2016 LTCH PPS standard 
Federal payment rate, under the broad authority of section 123 of 
the BBRA, as amended by section 307(b) of the BIPA, we are proposing 
to use wage data collected from cost reports submitted by IPPS 
hospitals for cost reporting periods beginning during FY 2012, 
without taking into account geographic reclassification under 
sections 1886(d)(8) and 1886(d)(10) of the Act. We are proposing to 
use FY 2012 wage data because these data are the most recent 
complete data available. We also noted that these are the same data 
used to compute the proposed FY 2016 acute care hospital inpatient 
wage index, as discussed in section III. of the preamble of this 
proposed rule. We are proposing to compute the proposed FY 2016 LTCH 
PPS standard Federal payment rate area wage index values consistent 
with the ``urban'' and ``rural'' geographic classifications (that 
is, labor market area delineations, as previously discussed in 
section V.B.2. of this Addendum) and our historical policy of not 
taking into account IPPS geographic reclassifications under sections 
1886(d)(8) and 1886(d)(10) of the Act in determining payments under 
the LTCH PPS. We also are proposing to continue to apportion wage 
data for multicampus hospitals with campuses located in different 
labor market areas to each CBSA where the campus or campuses are 
located, consistent with the IPPS policy. Lastly, under our proposed 
methodology for determining the FY 2016 LTCH PPS standard Federal 
payment rate area wage index values, we are proposing to continue to 
use our existing policy for determining area wage index values for 
areas where there are no IPPS wage data.
    Under our existing methodology, the LTCH PPS wage index value 
for urban CBSAs with no IPPS wage data would be determined by using 
an average of all of the urban areas within the State and the LTCH 
PPS wage index value for rural areas with no IPPS wage data would be 
determined by using the unweighted average of the wage indices from 
all of the CBSAs that are contiguous to the rural counties of the 
State.
    Based on the FY 2012 IPPS wage data that we are proposing to use 
to determine the proposed FY 2016 LTCH PPS standard Federal payment 
rate area wage index values in this proposed rule, there are no IPPS 
wage data for the urban area of Hinesville, GA (CBSA 25980). 
Consistent with the methodology discussed above, we calculated the 
proposed FY 2016 wage index value for CBSA 25980 as the average of 
the wage index values for all of the other urban areas within the 
State of Georgia (that is, CBSAs 10500, 12020, 12060, 12260, 15260, 
16860, 17980, 19140, 23580, 31420, 40660, 42340, 46660 and 47580), 
as shown in Table 12A, which is listed in section VI. of the 
Addendum to this proposed rule and available via the Internet on the 
CMS Web site). We note that, as IPPS wage data are dynamic, it is 
possible that urban areas without IPPS wage data will vary in the 
future.
    Based on the FY 2012 IPPS wage data that we are proposing to use 
to determine the proposed FY 2016 LTCH PPS standard Federal payment 
rate area wage index values in this proposed rule, there are no 
rural areas without IPPS hospital wage data. Therefore, it is not 
necessary to use our established methodology to calculate a proposed 
LTCH PPS standard Federal payment rate wage index value for proposed 
rural areas with no IPPS wage data for FY 2016. We note that, as 
IPPS wage data are dynamic, it is possible that the number of rural 
areas without IPPS wage data will vary in the future. The proposed 
FY 2016 LTCH PPS standard Federal payment rate wage index values 
that would be applicable for LTCH PPS standard Federal payment rate 
discharges occurring on or after October 1, 2015, through September 
30, 2016, are presented in Table 12A (for urban areas) and Table 12B 
(for rural areas), which are listed in section VI. of the Addendum 
of this proposed rule and available via the Internet on the CMS Web 
site.

5. Proposed Budget Neutrality Adjustment for Proposed Changes to the 
LTCH PPS Standard Federal Payment Rate Area Wage Level Adjustment

    Historically, the LTCH PPS wage index and labor-related share 
are updated annually based on the latest available data. Under Sec.  
412.525(c)(2), any changes to the area wage index values or labor-
related share are to be made in a budget neutral manner such that 
estimated aggregate LTCH PPS payments are unaffected; that is, will 
be neither greater than nor less than estimated aggregate LTCH PPS 
payments without such changes to the area wage level adjustment. 
Under this policy, we determine an area wage-level adjustment budget 
neutrality factor that will be applied to the standard Federal rate 
to ensure that any changes to the area wage level adjustments are 
budget neutral such that any changes to the area wage index values 
or labor-related share would not result in any change (increase or 
decrease) in estimated aggregate LTCH PPS payments. Accordingly, 
under Sec.  412.523(d)(4), we apply an area wage level adjustment 
budget neutrality factor in determining the standard Federal rate, 
and we also established a methodology for calculating an area wage 
level adjustment budget neutrality factor. (For additional 
information on the establishment of our budget neutrality policy for 
changes to the area wage level adjustment, we refer readers to the 
FY 2012 IPPS/LTCH PPS final rule (76 FR 51771 through 51773 and 
51809).)

[[Page 24645]]

    In this proposed rule, for FY 2016 LTCH PPS standard Federal 
payment rate cases, in accordance with Sec.  412.523(d)(4), we are 
proposing to apply an area wage level adjustment budget neutrality 
factor to adjust the standard Federal rate to account for the 
estimated effect of the proposed adjustments or updates to the area 
wage level adjustment under Sec.  412.525(c)(1) on estimated 
aggregate LTCH PPS payments using a methodology that is consistent 
with the methodology we established in the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51773). Specifically, we are proposing to 
determine an area wage level adjustment budget neutrality factor 
that would be applied to the LTCH PPS standard Federal payment rate 
under Sec.  412.523(d)(4) for FY 2016 using the following 
methodology:
    Step 1--We simulated estimated aggregate LTCH PPS standard 
Federal payment rate payments using the FY 2015 wage index values, 
including the 50/50 blended area wage index values, as applicable, 
and the FY 2015 labor-related share of 62.306 percent (as 
established in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50393 and 
50397).
    Step 2--We simulated estimated aggregate LTCH PPS standard 
Federal payment rate payments using the proposed FY 2016 wage index 
values (as shown in Tables 12A and 12B listed in the Addendum to 
this proposed rule and available via the Internet on the CMS Web 
site) and the proposed FY 2016 labor-related share of 62.2 percent 
(based on the latest available data as previously discussed 
previously in this Addendum).
    Step 3--We calculated the ratio of these estimated total LTCH 
PPS standard Federal payment rate payments by dividing the estimated 
total LTCH PPS standard Federal payment rate payments using the FY 
2015 area wage level adjustments (calculated in Step 1) by the 
estimated total LTCH PPS standard Federal payment rate payments 
using the proposed FY 2016 area wage level adjustments (calculated 
in Step 2) to determine the proposed area wage level adjustment 
budget neutrality factor for FY 2016 LTCH PPS standard Federal 
payment rate payments.
    Step 4--We then applied the proposed FY 2016 area wage level 
adjustment budget neutrality factor from Step 3 to determine the 
proposed FY 2016 LTCH PPS standard Federal payment rate after the 
application of the proposed FY 2016 annual update (discussed 
previously in section V.A.2. of this Addendum).
    We note that, under the statutory dual-rate LTCH PPS payment 
structure, only LTCH PPS cases that meet the statutory criteria to 
be excluded from the site neutral payment rate (that is, LTCH PPS 
standard Federal payment rate cases) would be paid based on the LTCH 
PPS standard Federal payment rate. Because the area wage level 
adjustment under Sec.  412.525(c) is an adjustment to the LTCH PPS 
standard Federal payment rate, we only used data from claims that 
would have qualified for payment at the LTCH PPS standard Federal 
payment rate if such rate were in effect at the time of discharge to 
calculate the proposed FY 2016 LTCH PPS standard Federal payment 
rate area wage level adjustment budget neutrality factor described 
above. (For additional information on our proposed application of 
site neutral payment rate required under section 1886(m)(6) of the 
Act, we refer readers to section VII.B. of the preamble of this 
proposed rule.)
    For this proposed rule, using the steps in the methodology 
described above, we determined a proposed FY 2016 LTCH PPS standard 
Federal payment rate area wage level adjustment budget neutrality 
factor of 1.001444. Accordingly, in section V.A.2. of the Addendum 
to this proposed rule, to determine the proposed FY 2016 LTCH PPS 
standard Federal payment rate, we are proposing to apply an area 
wage level adjustment budget neutrality factor of 1.001444, in 
accordance with Sec.  412.523(d)(4). The proposed FY 2016 LTCH PPS 
standard Federal payment rate shown in Table 1E of the Addendum to 
this proposed rule reflects this adjustment factor.

C. Proposed LTCH PPS Cost-of-Living Adjustment (COLA) for LTCHs 
Located in Alaska and Hawaii

    Under Sec.  412.525(b), a cost-of-living adjustment (COLA) is 
provided for LTCHs located in Alaska and Hawaii to account for the 
higher costs incurred in those States. Specifically, we apply a COLA 
to payments to LTCHs located in Alaska and Hawaii by multiplying the 
nonlabor-related portion of the standard Federal payment rate by the 
applicable COLA factors established annually by CMS. Higher labor-
related costs for LTCHs located in Alaska and Hawaii are taken into 
account in the adjustment for area wage levels described above.
    Under our current methodology, we update the COLA factors for 
Alaska and Hawaii every 4 years (at the same time as the update to 
the labor-related share of the IPPS market basket) (77 FR 53712 
through 53713). This methodology is based on a comparison of the 
growth in the Consumer Price Indexes (CPIs) for Anchorage, Alaska, 
and Honolulu, Hawaii, relative to the growth in the CPI for the 
average U.S. city as published by the Bureau of Labor Statistics 
(BLS). It also includes a 25-percent cap on the CPI-updated COLA 
factors. (For additional details on our current methodology for 
updating the COLA factors for Alaska and Hawaii, we refer readers to 
section VII.D.3. of the preamble of the FY 2013 IPPS/LTCH PPS final 
rule (77 FR 53481 through 53482).)
    We continue to believe that determining updated COLA factors 
using this methodology would appropriately adjust the nonlabor-
related portion of the LTCH PPS standard Federal payment rate for 
LTCHs located in Alaska and Hawaii. Under our finalized policy, we 
update the COLA factors using the methodology described above every 
4 years; the first year began in FY 2014 (77 FR 53482). Therefore, 
in this proposed rule, for FY 2016, under the broad authority 
conferred upon the Secretary by section 123 of the BBRA, as amended 
by section 307(b) of the BIPA, to determine appropriate payment 
adjustments under the LTCH PPS, we are proposing to continue to use 
the COLA factors based on the 2009 OPM COLA factors updated through 
2012 by the comparison of the growth in the CPIs for Anchorage, 
Alaska, and Honolulu, Hawaii, relative to the growth in the CPI for 
the average U.S. city as established in the FY 2014 IPPS/LTCH PPS 
final rule. (We refer readers to the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50998) for a discussion of the FY 2014 COLA factors.) 
Consistent with our historical practice, we are proposing to 
establish that the COLA factors shown in the following table would 
be used to adjust the nonlabor-related portion of the LTCH PPS 
standard Federal payment rate for LTCHs located in Alaska and Hawaii 
under Sec.  412.525(b).

    Proposed Cost-of-Living Adjustment Factors for Alaska and Hawaii
                Hospitals Under the LTCH PPS for FY 2016
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Alaska:
    City of Anchorage and 80-kilometer (50-mile)                    1.23
     radius by road...................................
    City of Fairbanks and 80-kilometer (50-mile)                    1.23
     radius by road...................................
    City of Juneau and 80-kilometer (50-mile) radius                1.23
     by road..........................................
    All other areas of Alaska.........................              1.25
Hawaii:
    City and County of Honolulu.......................              1.25
    County of Hawaii..................................              1.19
    County of Kauai...................................              1.25
    County of Maui and County of Kalawao..............              1.25
------------------------------------------------------------------------


[[Page 24646]]

D. Proposed Adjustment for LTCH PPS High-Cost Outlier (HCO) Cases

1. Overview

a. Background

    Under the broad authority conferred upon the Secretary by 
section 123 of the BBRA as amended by section 307(b) of the BIPA, in 
the regulations at Sec.  412.525(a), we established an adjustment 
for additional payments for outlier cases that have extraordinarily 
high costs relative to the costs of most discharges. We refer to 
these cases as high cost outliers (HCOs). Providing additional 
payments for outliers strongly improves the accuracy of the LTCH PPS 
in determining resource costs at the patient and hospital level. 
These additional payments reduce the financial losses that would 
otherwise be incurred when treating patients who require more costly 
care and, therefore, reduce the incentives to underserve these 
patients. Under our current HCO policy at Sec.  412.525(a), we set 
the outlier threshold before the beginning of the applicable rate 
year so that total estimated outlier payments are projected to equal 
8 percent of total estimated payments under the LTCH PPS.
    Under the current HCO policy, we make outlier payments for any 
discharges if the estimated cost of a case exceeds the adjusted 
payment under the LTCH PPS standard Federal payment rate plus a 
fixed-loss amount. Specifically, in accordance with existing Sec.  
412.525(a)(3), we make an additional payment for an HCO case that is 
equal to 80 percent of the difference between the estimated cost of 
the patient case and the outlier threshold, which is the sum of the 
adjusted payment under the LTCH PPS standard Federal payment rate 
and the fixed-loss amount. The fixed-loss amount is the amount used 
to limit the loss that a hospital incurs under the outlier policy 
for a case with unusually high costs before the LTCH will receive 
any additional payments. This results in Medicare and the LTCH 
sharing financial risk in the treatment of extraordinarily costly 
cases. Under the current LTCH PPS HCO policy, the LTCH's loss is 
limited to the fixed-loss amount and a fixed percentage of costs 
above the outlier threshold (the adjusted LTCH PPS standard Federal 
payment rate payment plus the fixed-loss amount). The fixed 
percentage of costs is called the marginal cost factor. We calculate 
the estimated cost of a case by multiplying the Medicare allowable 
covered charge by the hospital's overall hospital cost-to-charge 
ratio (CCR).
    Under the current HCO policy at Sec.  412.525(a), we determine a 
fixed-loss amount, that is, the maximum loss that an LTCH can incur 
under the LTCH PPS for a case with unusually high costs before the 
LTCH will receive any additional payments. We calculate the fixed-
loss amount by estimating aggregate payments with and without an 
outlier policy. The fixed-loss amount results in estimated total 
outlier payments being projected to be equal to 8 percent of 
projected total LTCH PPS payments. Currently, MedPAR claims data and 
CCRs based on data from the most recent Provider-Specific File (PSF) 
(or from the applicable statewide average CCR if an LTCH's CCR data 
are faulty or unavailable) are used to establish a fixed-loss 
threshold amount under the LTCH PPS.

b. Application of the Site Neutral Payment Rate

    Section 1206 of Public Law 113-67 establishes a new dual-rate 
LTCH PPS payment structure with two distinct payment rates for LTCH 
discharges, beginning in FY 2016. To implement this statutory 
change, as discussed in section VII.B. of the preamble of this 
proposed rule, we are proposing to pay hospitals for LTCH discharges 
that meet the criteria for exclusion from site neutral payment rate 
(that is, LTCH PPS standard Federal payment rate cases) based on the 
LTCH PPS standard Federal payment rate, which includes HCO payments 
determined under existing Sec.  412.525(a). Furthermore, we are 
proposing that the site neutral payment rate is the lower of the 
IPPS comparable per diem amount as determined under Sec.  
412.529(d)(4) (including any applicable adjustments, such as outlier 
payments), or 100 percent of the estimated cost of the case as 
determined under existing Sec.  412.529(d)(2), consistent with the 
statute.
    Under the new statutory dual-rate LTCH PPS payment structure, as 
discussed in section VII.B.7.b. of the preamble of this proposed 
rule, we are proposing to establish two separate HCO targets--one 
for LTCH PPS standard Federal payment rate cases and one for site 
neutral payment rate cases. We are proposing to revise the 
regulations by making the proposed changes to the HCO policy to 
account for the new statutory dual-rate LTCH PPS payment structure 
by revising paragraphs (a)(1), (a)(2), and (a)(3), and adding a new 
paragraph (a)(4) to existing Sec.  412.525 of the regulations. Under 
our proposed HCO policy revised in accordance with the new statutory 
LTCH PPS payment structure, we are proposing to establish a fixed-
loss amount and target for LTCH PPS standard Federal payment rate 
cases using the current LTCH PPS HCO policy, but limiting the data 
used under that policy to LTCH cases that would have been LTCH PPS 
standard Federal payment rate cases if the statutory changes had 
been in effect at the time of those discharges. Therefore, we are 
not proposing any modifications to the HCO methodology as it applies 
to LTCH PPS standard Federal payment rate cases other than 
determining a fixed-loss amount using only data from LTCH PPS 
standard Federal payment rate cases. Specifically, under our 
proposal, LTCH PPS standard Federal payment rate cases would receive 
an additional payment for an HCO case that is equal to 80 percent of 
the difference between the estimated cost of the case and the HCO 
threshold, which would be the sum of the LTCH PPS payment for the 
LTCH PPS standard Federal payment rate case and the fixed-loss 
amount for such cases. The fixed-loss amount for LTCH PPS standard 
Federal payment rate cases would continue to be determined so that 
estimated HCO payments would be projected to be equal to 8 percent 
of estimated total LTCH PPS payments for LTCH PPS standard Federal 
payment rate cases.
    Furthermore, we are proposing to revise the HCO policy under 
existing Sec.  412.525(a) to provide for high-cost outlier payments 
under the site neutral payment rate. Specifically, we are proposing 
that site neutral payment rate cases would receive an additional 
payment for HCOs that would be equal to 80 percent of the difference 
between the estimated cost of the case and the HCO threshold for 
site neutral payment rate discharges, which we are proposing would 
be the sum of site neutral payment rate for the case and the IPPS 
fixed-loss amount. In addition, in order to maintain budget 
neutrality, we are proposing to make the HCO payments for site 
neutral payment rate cases budget neutral by applying a proposed 
budget neutrality factor to the LTCH PPS payments for those site 
neutral payment rate cases. (Additional details on the proposed 
budget neutrality adjustment for HCO payments to site neutral 
payment rate cases is discussed subsequently in section V.D.4. of 
this Addendum.)

2. Determining LTCH CCRs Under the LTCH PPS

a. Background

    The following is a discussion of CCRs that are used in 
determining payments for HCO cases under Sec.  412.525(a), SSO cases 
paid under the LTCH PPS in accordance with Sec.  412.529, and 
proposed site neutral payment rate cases paid in accordance with 
proposed Sec.  412.522(c) (as discussed in section VII.B.4. of the 
preamble of this proposed rule). Although this section is specific 
to HCO cases, because CCRs and the policies and methodologies 
pertaining to them are used in determining payments for HCO, SSO, 
and proposed site neutral payment rate cases (to determine the 
estimated costs of these cases), we are discussing the determination 
of CCRs under the LTCH PPS for these three types of cases 
simultaneously in this section.
    In determining HCO payments in accordance with Sec.  412.525(a), 
SSO payments in accordance with Sec.  412.529 and proposed site 
neutral payment rate payments in accordance with proposed Sec.  
412.522(c), we calculate the estimated cost of the case by 
multiplying the LTCH's overall CCR by the Medicare allowable charges 
for the case. In general, we use the LTCH's overall CCR, which is 
computed based on either the most recently settled cost report or 
the most recent tentatively settled cost report, whichever is from 
the latest cost reporting period, in accordance with Sec.  
412.525(a)(4)(iv)(B), for HCOs, Sec.  412.529(f)(4)(ii) for SSOs, 
and proposed Sec.  412.522(c)(1)(ii) for proposed site neutral 
payment rate cases. (We note that, in some instances under the 
provisions of the regulations at Sec.  412.525(a)(4)(iv) and Sec.  
412.529(f)(4), and proposed Sec.  412.522(c)(1)(ii), we may use an 
alternative CCR, such as the statewide average CCR, a CCR that is 
specified by CMS, or that is requested by the hospital.) Under the 
LTCH PPS, a single prospective payment per discharge is made for 
both inpatient operating and capital-related costs. Therefore, we 
compute a single ``overall'' or ``total'' LTCH-specific CCR based on 
the sum of LTCH operating and capital costs (as described in Section 
150.24, Chapter 3, of the Medicare Claims Processing Manual (Pub. 
100-4)) as compared to total charges.

[[Page 24647]]

Specifically, an LTCH's CCR is calculated by dividing an LTCH's 
total Medicare costs (that is, the sum of its operating and capital 
inpatient routine and ancillary costs) by its total Medicare charges 
(that is, the sum of its operating and capital inpatient routine and 
ancillary charges).

b. LTCH Total CCR Ceiling

    Generally, an LTCH is assigned the applicable statewide average 
CCR if, among other things, an LTCH's CCR is found to be in excess 
of the applicable maximum CCR threshold (that is, the LTCH CCR 
ceiling). This is because CCRs above this threshold are most likely 
due to faulty data reporting or entry, and CCRs based on erroneous 
data should not be used to identify and make payments for outlier 
cases. Therefore, under our established policy, generally, if an 
LTCH's calculated CCR is above the applicable ceiling, the 
applicable LTCH PPS statewide average CCR is assigned to the LTCH 
instead of the CCR computed from its most recent (settled or 
tentatively settled) cost report data.
    In this proposed rule, using our established methodology for 
determining the LTCH total CCR ceiling, based on IPPS total CCR data 
from the December 2014 update of the PSF, we are proposing to 
establish a total CCR ceiling of 1.345 under the LTCH PPS for FY 
2016 in accordance with Sec.  412.525(a)(4)(iv)(C)(2) for HCOs, 
Sec.  412.529(f)(4)(iii)(B) for SSOs, and proposed Sec.  
412.522(c)(1)(ii) for site neutral payment rate cases. We also are 
proposing that if more recent data become available, we would use 
that data to determine the LTCH PPS CCR ceiling for the FY 2016 
final rule.

c. LTCH Statewide Average CCRs

    Our general methodology established for determining the 
statewide average CCRs used under the LTCH PPS is similar to our 
established methodology for determining the LTCH total CCR ceiling 
(described above) because it is based on ``total'' IPPS CCR data. 
Under the LTCH PPS HCO policy at Sec.  412.525(a)(4)(iv)(C) the SSO 
policy at Sec.  412.529(f)(4)(iii), and the proposed site neutral 
payment rate policy at proposed Sec.  412.522(c)(1)(ii), the MAC may 
use a statewide average CCR, which is established annually by CMS, 
if it is unable to determine an accurate CCR for an LTCH in one of 
the following circumstances: (1) New LTCHs that have not yet 
submitted their first Medicare cost report (for this purpose, 
consistent with current policy, a new LTCH is defined as an entity 
that has not accepted assignment of an existing hospital's provider 
agreement in accordance with Sec.  489.18); (2) LTCHs whose CCR is 
in excess of the LTCH CCR ceiling; and (3) other LTCHs for whom data 
with which to calculate a CCR are not available (for example, 
missing or faulty data). (Other sources of data that the MAC may 
consider in determining an LTCH's CCR include data from a different 
cost reporting period for the LTCH, data from the cost reporting 
period preceding the period in which the hospital began to be paid 
as an LTCH (that is, the period of at least 6 months that it was 
paid as a short-term, acute care hospital), or data from other 
comparable LTCHs, such as LTCHs in the same chain or in the same 
region.)
    Consistent with our historical practice of using the best 
available data, in this proposed rule, using our established 
methodology for determining the LTCH statewide average CCRs, based 
on the most recent complete IPPS ``total CCR'' data from the 
December 2014 update of the PSF, we are proposing to establish 
proposed LTCH PPS statewide average total CCRs for urban and rural 
hospitals that would be effective for discharges occurring on or 
after October 1, 2015 through September 30, 2016, in Table 8C listed 
in section VI. of the Addendum to this proposed rule (and available 
via the Internet). We also are proposing that if more recent data 
become available, we would use that data to determine the LTCH PPS 
statewide average total CCRs for FY 2016.
    Under the current LTCH PPS labor market areas, all areas in 
Delaware, the District of Columbia, New Jersey, and Rhode Island are 
classified as urban. Therefore, there are no rural statewide average 
total CCRs listed for those jurisdictions in Table 8C. This policy 
is consistent with the policy that we established when we revised 
our methodology for determining the applicable LTCH statewide 
average CCRs in the FY 2007 IPPS final rule (71 FR 48119 through 
48121) and is the same as the policy applied under the IPPS. In 
addition, although Connecticut and Massachusetts have areas that are 
designated as rural, there are no short-term, acute care IPPS 
hospitals or LTCHs located in those areas as of December 2014. 
Therefore, consistent with our existing methodology, we are 
proposing to use the national average total CCR for rural IPPS 
hospitals for rural Connecticut and Massachusetts in Table 8C listed 
in section VI. of the Addendum to this proposed rule (and available 
via the Internet). In addition, consistent with our existing 
methodology, in determining the urban and rural statewide average 
total CCRs for Maryland LTCHs paid under the LTCH PPS, we are 
proposing to continue to use, as a proxy, the national average total 
CCR for urban IPPS hospitals and the national average total CCR for 
rural IPPS hospitals, respectively. We are using this proxy because 
we believe that the CCR data in the PSF for Maryland hospitals may 
not be entirely accurate (as discussed in greater detail in the FY 
2007 IPPS final rule (71 FR 48120)).

d. Reconciliation of HCO, SSO, and Proposed Site Neutral Payment Rate 
Payments

    Under the HCO policy at Sec.  412.525(a)(4)(iv)(D), the SSO 
policy at Sec.  412.529(f)(4)(iv), and as proposed for site neutral 
payment rate cases at proposed Sec.  412.522(c)(4), the payments for 
HCO, SSO, and site neutral payment rate cases are subject to 
reconciliation. Specifically, any reconciliation of payments is 
based on the CCR that is calculated based on a ratio of cost-to-
charge data computed from the relevant cost report determined at the 
time the cost report coinciding with the discharge is settled. Our 
proposal to establish a reconciliation process for payments made to 
LTCHs for site neutral payment rate cases is discussed in section 
VII.B.4.a. of the preamble of this proposed rule. For additional 
information on the existing reconciliation policy, we refer readers 
to sections 150.26 through 150.28 of the Medicare Claims Processing 
Manual (Pub. 100-4) as added by Change Request 7192 (Transmittal 
2111; December 3, 2010) and the RY 2009 LTCH PPS final rule (73 FR 
26820 through 26821).

3. Proposed High-Cost Outlier Payments for LTCH PPS Standard Federal 
Payment Rate Cases

a. Establishment of the Proposed LTCH PPS Fixed-Loss Amount for LTCH 
PPS Standard Federal Payment Rate Cases for FY 2016

    When we implemented the LTCH PPS, under the broad authority of 
section 123 of the BBRA as amended by section 307(b) of BIPA, we 
established a fixed-loss amount so that total estimated outlier 
payments are projected to equal 8 percent of total estimated 
payments under the LTCH PPS (67 FR 56022 through 56026). To 
determine the fixed-loss amount, we estimate outlier payments and 
total LTCH PPS payments for each case using claims data from the 
MedPAR files. Specifically, we estimate the cost of the case by 
multiplying the Medicare covered charges from the claim by the 
LTCH's CCR. Under the HCO policy at Sec.  412.525(a), if the 
estimated cost of the case exceeds the outlier threshold, we make an 
outlier payment equal to 80 percent of the difference between the 
estimated cost of the case and the outlier threshold (that is, the 
sum of the adjusted standard Federal rate payment and the fixed-loss 
amount).
    As noted above and as discussed in greater detail in section 
VII.B.7.b. of the preamble of this proposed rule, under the new 
statutory dual-rate LTCH PPS payment structure, we are proposing to 
establish two separate HCO targets--one for LTCH PPS standard 
Federal payment rate cases and one for site neutral payment rate 
cases. Under this proposal, for LTCH PPS standard Federal payment 
rate cases, we are proposing to establish a fixed-loss amount and 
target using the current LTCH PPS HCO policy, but to limit the data 
used under that policy to LTCH cases that would have been paid as 
LTCH PPS standard Federal payment rate cases, if that payment rate 
had been in effect at the time of those discharges. Therefore, we 
are not proposing to make any modifications to the existing LTCH PPS 
HCO payment methodology as it applies to LTCH PPS standard Federal 
payment rate cases, other than determining a fixed-loss amount using 
only data from LTCH PPS standard Federal payment rate cases. As 
such, LTCH PPS standard Federal payment rate cases would continue to 
receive an additional payment for any HCO case that would be equal 
to 80 percent of the difference between the estimated cost of the 
case and the HCO threshold, which would be the sum of the LTCH PPS 
payment for the LTCH PPS standard Federal payment rate case and the 
fixed-loss amount. The fixed-loss amount for LTCH PPS standard 
Federal payment rate cases would continue to be determined so that 
estimated HCO payments would be projected to equal 8 percent of 
estimated total LTCH PPS standard Federal payment rate cases, and a 
budget neutrality factor will continue to be applied to LTCH PPS 
standard Federal payment rate cases to offset that 8 percent so that 
HCO payments

[[Page 24648]]

for LTCH PPS standard Federal payment rate cases would be budget 
neutral. Below we present our proposed calculation of the proposed 
LTCH PPS fixed-loss amount for LTCH PPS standard Federal payment 
rate cases for FY 2016, which is consistent with the methodology 
used to establish the FY 2015 LTCH PPS fixed-loss amount. 
(Additional discussion of our HCO payment policy proposals for site 
neutral payment rate cases is discussed subsequently in section 
V.D.4. of this Addendum.)
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50399 through 
50400), we presented our policies regarding the methodology and data 
we used to establish a fixed-loss amount of $14,972 for FY 2015, 
which was calculated using our existing methodology (based on the 
data and the rates and policies presented in that final rule) in 
order to maintain estimated HCO payments at the projected 8 percent 
of total estimated LTCH PPS payments. Consistent with our historical 
practice of using the best data available, in determining the fixed-
loss amount for FY 2015, we used the most recent available LTCH 
claims data and CCR data, that is, LTCH claims data from the March 
2014 update of the FY 2013 MedPAR file and CCRs from the March 2014 
update of the PSF, as these data were the most recent complete LTCH 
data available at that time.
    In this proposed rule, we are proposing to continue to use our 
existing methodology to calculate a fixed-loss amount for LTCH PPS 
standard Federal payment rate cases for FY 2016 using the best 
available data that would maintain estimated HCO payments at the 
projected 8 percent of total estimated LTCH PPS payments for LTCH 
PPS standard Federal payment rate cases (based on the proposed rates 
and policies for these cases presented in this proposed rule). 
Specifically, based on the most recent complete LTCH data available 
(that is, LTCH claims data from the December 2014 update of the FY 
2014 MedPAR file and CCRs from the December 2014 update of the PSF), 
we are proposing to determine a fixed-loss amount for LTCH PPS 
standard Federal payment rate cases for FY 2016 that would result in 
estimated outlier payments projected to be equal to 8 percent of 
total estimated payments for these cases in FY 2016. Under the broad 
authority of section 123(a)(1) of the BBRA and section 307(b)(1) of 
the BIPA, we are proposing a fixed-loss amount of $18,768 for LTCH 
PPS standard Federal payment rate cases for FY 2016, and also to 
continue to make an additional HCO payment for the cost of an LTCH 
PPS standard Federal payment rate case that exceeds the HCO 
threshold amount that is equal to 80 percent of the difference 
between the estimated cost of the case and the outlier threshold 
(the sum of the adjusted LTCH PPS standard Federal payment rate 
payment and the proposed fixed-loss amount for LTCH PPS standard 
Federal payment rate cases of $18,768).
    We note that the proposed fixed-loss amount of $18,768 for LTCH 
PPS standard Federal payment rate cases for FY 2016 is higher than 
the FY 2015 fixed-loss amount of $14,792. This increase is largely 
attributable to the implementation of the new statutory dual-rate 
LTCH PPS payment structure, under which we have proposed to have 
separate HCO target amounts for LTCH PPS standard Federal payment 
rate cases and site neutral payment rate cases. The FY 2015 fixed-
loss amount was determined based data from all LTCH cases--both 
those that would have been paid as site neutral payment rate cases 
and those that would have been paid as LTCH PPS standard Federal 
payment rate cases if the statutory changes had been in effect at 
that time. However, under our proposal, the proposed fixed-loss 
amount of $18,768 for FY 2016 would only be used to determine HCO 
payments made for LTCH PPS standard Federal payment rate cases. We 
currently estimate that the FY 2015 fixed-loss amount of $14,972 
results in estimated HCO payments for LTCH PPS standard Federal 
payment rate cases of approximately 8.6 percent of total estimated 
FY 2015 LTCH PPS payments to those cases, which exceeds the 8 
percent target. Therefore, we believe that it is necessary and 
appropriate to increase the fixed-loss amount to maintain that, for 
LTCH PPS standard Federal payment rate cases, estimated HCO payments 
would equal 8 percent of estimated total LTCH PPS payments for those 
cases as required under the proposed revisions to Sec.  412.525(a). 
(For further information on the existing 8 percent HCO ``target'' 
requirement, we refer readers to the August 30, 2002 LTCH PPS final 
rule (67 FR 56022 through 56024).) Maintaining the fixed-loss amount 
at the current level would result in HCO payments that are more than 
the current regulatory 8-percent target that we are proposing would 
apply to total payments for LTCH PPS standard Federal payment rate 
cases because a lower fixed-loss amount would result in more cases 
qualifying as outlier cases, as well as higher outlier payments for 
qualifying HCO cases because the maximum loss that an LTCH must 
incur before receiving an HCO payment (that is, the fixed-loss 
amount) would be smaller. Consistent with our historical practice, 
we are proposing that if more recent data is available, we would use 
such data to calculate the FY 2016 fixed-loss amount for LTCH PPS 
standard Federal payment rate cases in the final rule.

b. Application of the High-Cost Outlier Policy to SSO Cases

    Under our proposals to implement the dual-rate LTCH PPS payment 
structure required by statute, we are proposing that LTCH PPS 
standard Federal payment rate cases (that is, LTCH discharges that 
meet the criteria for exclusion from the site neutral payment rate) 
would continue to be paid based on the LTCH PPS standard Federal 
payment rate, and would include all of the existing payment 
adjustments under Sec.  412.525(d), such as the adjustments for SSO 
cases under Sec.  412.529. (For additional information on our 
proposed payments for LTCH standard payment rate cases, we refer 
readers to section VII.B.4.c. of the preamble of this proposed 
rule.) Under some rare circumstances, an LTCH discharge can qualify 
as an SSO case (as defined in the regulations at Sec.  412.529 in 
conjunction with Sec.  412.503) and also as an HCO case, as 
discussed in the August 30, 2002 final rule (67 FR 56026). In this 
scenario, a patient could be hospitalized for less than five-sixths 
of the geometric average length of stay for the specific MS-LTC-DRG, 
and yet incur extraordinarily high treatment costs. If the estimated 
costs exceeded the HCO threshold (that is, the SSO payment plus the 
fixed-loss amount), the discharge is eligible for payment as an HCO. 
Therefore, for an SSO case in FY 2016, the HCO payment would be 80 
percent of the difference between the estimated cost of the case and 
the outlier threshold (the sum of the proposed fixed-loss amount of 
$18,768 and the amount paid under the SSO policy as specified in 
Sec.  412.529).

4. Proposed High-Cost Outlier Payments for Site Neutral Payment Rate 
Cases

    Under the new dual-rate LTCH PPS payment structure, the statute 
establishes two distinct payment rates for LTCH discharges beginning 
in FY 2016. Under this statutory change, as discussed in section 
VII.B. of the preamble of this proposed rule, we are proposing to 
pay for LTCH discharges that meet the criteria for exclusion from 
the site neutral payment rate (that is, LTCH PPS standard Federal 
payment rate cases) based on the LTCH PPS standard Federal payment 
rate. In addition, consistent with the statute, we are proposing 
that the site neutral payment rate is the lower of the IPPS 
comparable per diem amount as determined under Sec.  412.529(d)(4), 
including any applicable outlier payments as specified in Sec.  
412.525(a); or 100 percent of the estimated cost of the case as 
determined under existing Sec.  412.529(d)(2). Furthermore, we are 
proposing have two separate HCO targets-one for LTCH PPS standard 
Federal payment rate cases and one for site neutral payment rate 
cases.
    For site neutral payment rate cases, we are proposing that such 
cases would receive an additional HCO payment for costs that exceed 
the HCO threshold that would be equal to 80 percent of the 
difference between the estimated cost of the case and the HCO 
threshold. We are proposing that the HCO threshold for site neutral 
payment rate cases would be the sum of the site neutral payment rate 
for the case and the IPPS fixed-loss amount. (We note that, as 
discussed in section VII.B.7.b. of the preamble of this proposed 
rule, in light of our HCO proposals in accordance with our 
implementation of the new statutory dual-rate LTCH PPS payment 
structure, any site neutral payment rate case that is paid 100 
percent of the estimated cost of the case (because that amount is 
lower than the IPPS comparable per diem amount) would not be 
eligible to receive a HCO payment because, by definition, the 
estimated costs of such cases would never exceed the IPPS comparable 
amount by any threshold.) Under this proposal, we are proposing that 
HCO payments for site neutral payment rate cases would be budget 
neutral, such that the proposed site neutral payment rate HCO 
payments would not result in any change in estimated aggregate LTCH 
PPS payments. In order to achieve this, under proposed new Sec.  
412.522(c)(2)(i), we are proposing to apply a budget neutrality 
factor to the payments for all site neutral payment rate cases, 
which would be established on an estimated basis. (For additional 
details on our HCO policy

[[Page 24649]]

proposals for site neutral payment rate cases, we refer readers to 
section VII.B.7.b. of the preamble of this proposed rule.)
    As we discussed in section VII.B.7.b. of the preamble of this 
proposed rule, in order to estimate the magnitude a proposed budget 
neutrality adjustment for HCO payments for site neutral payment rate 
cases, we relied on the assumption by our actuaries that site 
neutral payment rate cases would have lengths of stay and costs 
comparable to IPPS cases assigned to the same MS-DRG. Because site 
neutral payment rate cases are expected to have lengths of stay and 
costs comparable to IPPS cases assigned to the same MS DRG, we 
project that our proposal to use the IPPS fixed-loss threshold for 
the site neutral payment rate cases would result in HCO payments for 
site neutral payment rate cases that are similar in proportion as is 
seen in IPPS cases assigned to the same MS-DRG; that is, 5.1 
percent. Therefore, under proposed new Sec.  412.522(c)(2)(i), we 
are proposing to adjust all payments for site neutral payment rate 
cases by a budget neutrality factor so that the estimated HCO 
payments payable for site neutral payment rate cases do not result 
in any increase in aggregate LTCH PPS payments.
    The statutory LTCH PPS payment changes required by section 
1886(m)(6) of the Act (that is, the application of the site neutral 
payment rate) are effective for LTCH PPS discharges occurring in 
cost reporting periods beginning on or after October 1, 2015. In 
this proposed rule, to estimate total LTCH PPS site neutral payment 
rate payments in Federal FY 2016, we are proposing an adjustment to 
account for the varying effective dates of the statutory dual-rate 
LTCH PPS payment structure. In order to estimate FY 2016 LTCH PPS 
payments based on site neutral payment rate cases, it is necessary 
to account for the fact that LTCHs whose cost reporting periods 
begin after October 1, 2015, will receive the LTCH PPS standard 
Federal payment rates for all of their LTCH PPS cases, including 
their cases that would be site neutral payment rate cases, until the 
start of their next cost reporting period. For purposes of 
estimating site neutral payment rate payments in FY 2016, we 
examined LTCHs whose cost reporting periods begin in the first 
quarter of FY 2016 (that is, October through December 2015). We 
modeled that all of the FY 2016 site neutral payment rate cases 
associated with these LTCHs would be paid at the proposed 
transitional blended payment rate (that is, 50 percent of the 
applicable site neutral payment rate amount for the discharge as 
determined under proposed new Sec.  412.522(c)(1) and 50 percent of 
the applicable LTCH PPS standard Federal payment rate determined 
under Sec.  412.523). All of the first quarter FY 2016 site neutral 
payment rate cases for LTCHs whose cost reporting periods begin 
after the start of the first quarter of FY 2016 were modeled as 
being paid at the LTCH PPS standard Federal payment rate for all 
discharges in that quarter. We then examined LTCHs whose cost 
reporting periods begin in the second quarter of FY 2016 (that is, 
January through March 2016). We modeled that all of the second, 
third, and fourth quarter FY 2016 site neutral payment rate cases 
associated with these LTCHs would be paid at the transitional 
blended payment rate. All of the second quarter FY 2016 site neutral 
payment rate cases for LTCHs whose cost reporting periods begin 
after the start of the second quarter of FY 2016 were modeled as 
being paid at the LTCH PPS standard Federal payment rate for all 
discharges in that quarter. Similarly, we examined LTCHs whose cost 
reporting periods begin in the third quarter of FY 2016 (that is, 
April through June 2016). We modeled that all of the third and 
fourth quarter FY 2016 site neutral payment rate cases associated 
with these LTCHs would be paid at the transitional blended payment 
rate. For all of the third quarter FY 2016 site neutral payment rate 
cases for LTCHs whose cost reporting periods begin after the start 
of the third quarter of FY 2016, we modeled as being paid at the 
LTCH PPS standard Federal payment rate. Finally, we examined LTCHs 
whose cost reporting periods begin in the fourth quarter of FY 2016 
(that is, July through September of 2016). We modeled all of the 
fourth quarter FY 2016 site neutral payment rate cases associated 
with these LTCHs as being paid at the transitional blended payment 
rate. We believe that this approach is reasonable for the purpose of 
taking into account in our FY 2016 payment estimates given the fact 
that LTCHs whose cost reporting periods begin after October 1, 2015 
will receive the LTCH PPS standard Federal payment rate as payment 
for all of their LTCH PPS cases, including their cases that would be 
categorized as site neutral payment rate cases, until the start of 
their next cost reporting period. Based on the fiscal year start 
dates recorded in the December update of the Provider Specific File, 
of the 418 LTCHs in our database of LTCH claims from the December 
2014 update of the FY 2014 MedPAR files used for this proposed rule, 
the following percentages apply in the approach described above: 
10.85 percent of site neutral payment rate cases are from LTCHs 
whose cost reporting periods begin in the first quarter of FY 2016; 
31.41 percent of site neutral payment rate cases are from LTCHs 
whose cost reporting periods begin in the second quarter of FY 2016; 
10.83 percent of site neutral payment rate cases are from LTCHs 
whose cost reporting periods begin in the third quarter of FY 2016; 
and 46.91 percent of site neutral payment rate cases are from LTCHs 
whose cost reporting periods begin in the fourth quarter of FY 2016.
    Using the approach described above to account for when LTCHs' 
first cost reporting period begins on or after October 1, 2015, and 
based on the applicable LTCH claims in our database from the 
December 2014 update of the FY 2014 MedPAR files, we estimate that 
site neutral payment rate HCO payments would be approximately 2.3 
percent of total LTCH PPS payments for site neutral payment rate 
cases in FY 2016. Therefore, we are proposing to apply a budget 
neutrality factor of 0.976996 to all payments for site neutral 
payment rate cases in FY 2016 so that the estimated HCO payments 
payable to those cases do not result any increase in aggregate LTCH 
PPS payments, in accordance with proposed new Sec.  
412.522(c)(2)(i).

E. Proposed Update to the IPPS Comparable/Equivalent Amounts To 
Reflect the Statutory Changes to the IPPS DSH Payment Adjustment 
Methodology

    In the FY 2014 IPPS/LTCH PPS final rule, we established a policy 
for reflecting the changes to the Medicare IPPS DSH payment 
adjustment methodology provided for by section 3133 of the 
Affordable Care Act in the calculation of the ``IPPS comparable 
amount'' under the SSO policy at Sec.  412.529 and the ``IPPS 
equivalent amount'' under the 25-percent threshold payment 
adjustment policy at Sec.  412.534 and Sec.  412.536. Historically, 
the determination of both the ``IPPS comparable amount'' and the 
``IPPS equivalent amount'' includes an amount for inpatient 
operating costs ``for the costs of serving a disproportionate share 
of low-income patients.'' Under the statutory changes to the 
Medicare DSH payment adjustment methodology that began in FY 2014, 
in general, eligible IPPS hospitals receive an empirically justified 
Medicare DSH payment equal to 25 percent of the amount they 
otherwise would have received under the statutory formula for 
Medicare DSH payments prior to the amendments made by the Affordable 
Care Act. The remaining amount, equal to an estimate of 75 percent 
of the amount that otherwise would have been paid as Medicare DSH 
payments, reduced to reflect changes in the percentage of 
individuals under the age of 65 who are uninsured, is made available 
to make additional payments to each hospital that qualifies for 
Medicare DSH payments and that has uncompensated care. The 
additional uncompensated care payments are based on the hospital's 
amount of uncompensated care for a given time period relative to the 
total amount of uncompensated care for that same time period 
reported by all IPPS hospitals that receive Medicare DSH payments.
    To reflect the statutory changes to the Medicare DSH payment 
adjustment methodology in the calculation of the ``IPPS comparable 
amount'' and the ``IPPS equivalent amount'' under the LTCH PPS, we 
stated that we will include a reduced Medicare DSH payment amount 
that reflects the projected percentage of the payment amount 
calculated based on the statutory Medicare DSH payment formula prior 
to the amendments made by the Affordable Care Act that will be paid 
to eligible IPPS hospitals as empirically justified Medicare DSH 
payments and uncompensated care payments in that year (that is, a 
percentage of the operating DSH payment amount that has historically 
been reflected in the LTCH PPS payments that is based on IPPS 
rates). We also stated that the projected percentage will be updated 
annually, consistent with the annual determination of the amount of 
uncompensated care payments that will be made to eligible IPPS 
hospitals. As explained in the FY 2014 IPPS/LTCH PPS final rule (79 
FR 50766 through 50767), we believe that this approach results in 
appropriate payments under the LTCH PPS and is consistent with our 
intention that the ``IPPS comparable amount'' and the ``IPPS 
equivalent amount'' under the LTCH PPS closely resemble what an IPPS 
payment would have been for the same episode of

[[Page 24650]]

care, while recognizing that some features of the IPPS cannot be 
translated directly into the LTCH PPS.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50400 through 
50401), we discussed that, for FY 2015, based on the latest data 
available at that time, we projected that the reduction in the 
amount of Medicare DSH payments pursuant to section 1886(r)(1) of 
the Act, along with the proposed payments for uncompensated care 
under section 1886(r)(2) of the Act, would result in overall 
Medicare DSH payments equaling 85.26 percent of the amount of 
Medicare DSH payments that would otherwise have been made in the 
absence of amendments made by the Affordable Care Act. Therefore, 
the calculation of the ``IPPS comparable amount'' under Sec.  
412.529 and the ``IPPS equivalent amount'' under Sec.  412.534 and 
Sec.  412.536 for FY 2015 includes an applicable operating Medicare 
DSH payment amount that would be equal to 85.26 percent of the 
operating Medicare DSH payment amount based on the statutory 
Medicare DSH payment formula prior to the amendments made by the 
Affordable Care Act.
    For FY 2016, as discussed in greater detail in section 
IV.D.3.d.(2) of the preamble of this proposed rule, based on the 
most recent data available, our estimate of 75 percent of the amount 
that would otherwise have been paid as Medicare DSH payments (under 
the methodology outlined in section 1886(r)(2) of the Act) would be 
adjusted to 63.69 percent of that amount to reflect the change in 
the percentage of individuals who are uninsured. The resulting 
amount would then be used to determine the amount of uncompensated 
care payments that will be made to eligible IPPS hospitals in FY 
2016. In other words, Medicare DSH payments prior to the amendments 
made by the Affordable Care Act would be adjusted to 47.77 percent 
(the product of 75 percent and 63.69 percent) and the resulting 
amount would be used to calculate the uncompensated care payments to 
eligible hospitals. As a result, for FY 2016, we project that the 
reduction in the amount of Medicare DSH payments pursuant to section 
1886(r)(1) of the Act, along with the payments for uncompensated 
care under section 1886(r)(2) of the Act, would result in overall 
Medicare DSH payments of 72.77 percent of the amount of Medicare DSH 
payments that would otherwise have been made in the absence of 
amendments made by the Affordable Care Act (that is, 25 percent + 
47.77 percent = 72.77 percent).
    We also are proposing that, consistent with our historical 
practice of using the most recent data available, if more recent 
data become available for the final rule, we would use such data to 
determine the percentage of the operating Medicare DSH payment 
amount based on the statutory Medicare DSH payment formula prior to 
the amendments made by the Affordable Care Act used in the 
calculation of the ``IPPS comparable amount'' under Sec.  412.529 
and the ``IPPS equivalent amount'' under Sec.  412.534 and Sec.  
412.536 for FY 2016. In this proposed rule, for FY 2016, we are 
proposing to establish that the calculation of the ``IPPS comparable 
amount'' under Sec.  412.529 and the ``IPPS equivalent amount'' 
under Sec.  412.534 and Sec.  412.536 would include an applicable 
operating Medicare DSH payment amount that will be equal to 72.77 
percent of the operating Medicare DSH payment amount based on the 
statutory Medicare DSH payment formula prior to the amendments made 
by the Affordable Care Act.

F. Computing the Proposed Adjusted LTCH PPS Federal Prospective 
Payments for FY 2016

    Section 412.525 sets forth the adjustments to the LTCH PPS 
standard Federal rate. Under the new statutory dual-rate LTCH PPS 
payment structure that begins in FY 2016, only LTCH PPS cases that 
meet the statutory criteria to be excluded from the site neutral 
payment rate would be paid based on the LTCH PPS standard Federal 
payment rate (as discussed in section VII.B. of the preamble of this 
proposed rule). Under Sec.  412.525(c), the proposed LTCH PPS 
standard Federal rate is adjusted to account for differences in area 
wages by multiplying the proposed labor-related share of the LTCH 
PPS standard Federal payment for a case by the applicable LTCH PPS 
wage index (FY 2016 values are shown in Tables 12A through 12B 
listed in section VI. of the Addendum of this proposed rule and are 
available via the Internet). The proposed LTCH PPS standard Federal 
payment is also adjusted to account for the higher costs of LTCHs 
located in Alaska and Hawaii by the applicable COLA factors (the 
proposed FY 2016 factors are shown in the chart in section V.D. of 
this Addendum) in accordance with Sec.  412.525(b). In this proposed 
rule, we are proposing to establish an LTCH PPS standard Federal 
payment rate for FY 2016 of $41,883.93, as discussed in section 
V.A.2. of the Addendum to this proposed rule. We illustrate the 
methodology to adjust the proposed LTCH PPS standard Federal rate 
for FY 2016 in the following example:
    Example: During FY 2016, a Medicare discharge that meets the 
criteria to be excluded from the site neutral payment rate, that is 
an LTCH PPS standard Federal payment rate case, is from an LTCH that 
is located in Chicago, Illinois (CBSA 16974). The proposed FY 2016 
LTCH PPS wage index value for CBSA 16974 is 1.0295 (obtained from 
Table 12A listed in section VI. of the Addendum of this proposed 
rule and available via the Internet on the CMS Web site). The 
Medicare patient case is classified into MS-LTC-DRG 189 (Pulmonary 
Edema & Respiratory Failure), which has a proposed relative weight 
for FY 2016 of 0.9071 (obtained from Table 11 listed in section VI. 
of the Addendum of this proposed rule and available via the Internet 
on the CMS Web site). The LTCH submitted quality reporting data for 
FY 2016 in accordance with the LTCHQRP under section 1886(m)(5) of 
the Act.
    To calculate the LTCH's total adjusted Federal prospective 
payment for this Medicare patient case in FY 2016, we computed the 
wage-adjusted proposed Federal prospective payment amount by 
multiplying the unadjusted proposed FY 2016 LTCH PPS standard 
Federal payment rate ($41,883.93) by the proposed labor-related 
share (62.2 percent) and the proposed wage index value (1.0295). 
This wage-adjusted amount was then added to the proposed nonlabor-
related portion of the unadjusted proposed LTCH PPS standard Federal 
payment rate (37.8 percent; adjusted for cost of living, if 
applicable) to determine the adjusted proposed LTCH PPS standard 
Federal payment rate, which is then multiplied by the proposed MS-
LTC-DRG relative weight (0.9071) to calculate the total adjusted 
proposed LTCH PPS standard Federal prospective payment for FY 2016 
($38,690.05). The table below illustrates the components of the 
calculations in this example.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Proposed LTCH PPS Standard Federal Prospective Payment        $41,883.93
 Rate...................................................
Proposed Labor-Related Share............................         x 0.622
Proposed Labor-Related Portion of the LTCH PPS Standard     = $26,051.80
 Federal Payment Rate...................................
Proposed Wage Index (CBSA 16974)........................        x 1.0295
Proposed Wage-Adjusted Labor Share of LTCH PPS Standard     = $26,820.33
 Federal Payment Rate...................................
Proposed Nonlabor-Related Portion of the LTCH PPS           + $15,832.13
 Standard Federal Payment Rate ($41,883.93 x 0.378).....
Adjusted Proposed LTCH PPS Standard Federal Payment         = $42,652.46
 Amount.................................................
MS-LTC-DRG 189 Proposed Relative Weight.................        x 0.9071
Total Adjusted Proposed LTCH PPS Standard Federal           = $38,690.05
 Prospective Payment....................................
------------------------------------------------------------------------

VI. Tables Referenced in This Proposed Rule and Available Only Through 
the Internet on the CMS Web Site

    This section lists the tables referred to throughout the 
preamble of this proposed rule and in this Addendum. In the past, a 
majority of these tables were published in the Federal Register as 
part of the annual proposed and final rules. However, similar to FYs 
2012 through 2015, for the FY 2016 rulemaking cycle, the IPPS and 
LTCH tables will not be published in the Federal Register in the 
annual IPPS/LTCH PPS proposed and final rules and will be available 
only through the Internet. Specifically, all IPPS tables listed 
below, with the exception of IPPS Tables 1A, 1B, 1C, and 1D, and 
LTCH PPS Table 1E will be available only through the Internet. IPPS 
Tables 1A, 1B, 1C, and 1D, and LTCH PPS Table 1E are displayed at 
the end of this section and will continue to be published in the 
Federal Register as part of the annual proposed and final rules.
    As discussed in section III. I. of the preamble to this proposed 
rule, we are proposing to streamline and consolidate the wage index 
tables for FY 2016 and subsequent fiscal years. In previous fiscal 
years, the wage index tables have consisted of the following 12 
tables: Table 2 (acute care hospitals' case-mix indexes; hospital 
wage indexes; hospital average hourly wages, and

[[Page 24651]]

3-year average of hospital average hourly wages); Table 3A (relevant 
fiscal year and 3-year average hourly wage for acute care hospitals 
in urban areas by CBSA); Table 3B (relevant fiscal year and 3-year 
average hourly wage for acute care hospitals in rural areas by 
CBSA); Table 4A (wage index and capital geographic adjustment factor 
(GAF) for acute care hospitals in urban areas by CBSA and by State); 
Table 4B (wage index and capital GAF for acute care hospitals in 
rural areas by CBSA and by State); Table 4C (wage index and capital 
GAF for acute care hospitals that are reclassified by CBSA and by 
State); Table 4D (States designated as frontier, with acute care 
hospitals receiving at a minimum the frontier State floor wage 
index; urban areas with acute care hospitals receiving the statewide 
rural floor or imputed rural floor wage index); Table 4E (urban 
CBSAs and constituent counties for acute care hospitals); Table 4F 
(Puerto Rico wage index and capital GAF for acute care hospitals by 
CBSA); Table 4J (out-migration adjustment for acute care hospitals); 
Table 9A (hospital reclassifications and redesignations); and Table 
9C (hospitals redesignated as rural under section 1886(d)(8)(e) of 
the Act). With the exception of Table 4E, we are proposing to 
consolidate the information from the 11 other tables listed above 
into 2 new tables. The wage index tables provided in previous fiscal 
years either display information by CMS Certification Number (CCN) 
or by CBSA number. The new Table 2 contains information by CCN and 
information from the following tables that have been provided in 
previous fiscal years: Tables 2, 4J, 9A, and 9C. The new Table 3 
contains information by CBSA and information from the following 
tables that have been provided in previous fiscal years: Tables 3A, 
3B, 4A, 4B, 4C, 4D, and 4F. We believe these two new tables will be 
easier for the public to navigate and find all the relevant data and 
information from the tables provided in previous fiscal years. 
Finally, in previous fiscal years, Table 4E provided a list of urban 
CBSAs and constituent counties. Because of formatting 
technicalities, we found it difficult to consolidate the information 
from Table 4E into the proposed two new tables. Therefore, we are 
proposing to provide the data previously published as Table 4E for 
each annual proposed and final rule as one of our data files on our 
Web page (the same Web page where the county to CBSA crosswalk is 
posted).
    As discussed in sections II.G.3.e., II.G.10.a., II.G.11., and 
II.G.13. of the preamble of this proposed rule, we developed the 
following ICD-10-CM and ICD-10-PCS code tables for FY 2016: Table 
6B--New Procedure Codes; Table 6I--Complete MCC List; Table 6J--
Complete CC List; Table 6K--Complete List of CC Exclusions; Table 
6L--Principal Diagnosis Is Its Own MCC List; Table 6M--Principal 
Diagnosis Is Its Own CC List; Table 6M.1--Additions to the Principal 
Diagnosis Is Its Own CC List; and Table 6P--ICD-10-PCS Code 
Translations for Proposed MS-DRG Changes. Table 6P contains multiple 
tables 6P.1a through 6P.2a that list the ICD-10-PCS code 
translations relating to specific MS-DRG proposals. In addition, 
under the HAC Reduction Program established by section 3008 of the 
Affordable Care Act, a hospital's total payment may be reduced by 1 
percent if it is in the lowest HAC performance quartile. However, as 
discussed in section IV.G. of the preamble of this proposed rule, we 
are not providing the hospital-level data as a table associated with 
this proposed rule. The hospital-level data for the FY 2016 HAC 
Reduction Program will be made publicly available once it has 
undergone the review and corrections process.
    Finally, a hospital's Factor 3 is the proportion of the 
uncompensated care amount that a DSH eligible hospital will receive 
under section 3133 of the Affordable Care Act. Factor 3 is the 
hospital's estimated number of Medicaid days and Medicare SSI days 
relative to the estimate of all DSH hospitals' Medicaid days and 
Medicare SSI days. Table 18 associated with this proposed rule 
contains the FY 2016 Medicare DSH uncompensated care payment Factor 
3 for all hospitals and identifies whether or not a hospital is 
projected to receive DSH and, therefore, eligible to receive the 
additional payment for uncompensated care for FY 2016.
    Readers who experience any problems accessing any of the tables 
that are posted on the CMS Web sites identified below should contact 
Michael Treitel at (410) 786-4552.
    The following IPPS tables for this FY 2016 proposed rule are 
available only through the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. Click on the link on the left side of 
the screen titled, ``FY 2016 IPPS Proposed Rule Home Page'' or 
``Acute Inpatient--Files for Download''.

Table 2.--Proposed Case-Mix Index and Wage Index Table by CCN--FY 
2016
Table 3.--Proposed Wage Index Table by CBSA--FY 2016
Table 5.--Proposed List of Medicare Severity Diagnosis-Related 
Groups (MS-DRGs), Relative Weighting Factors, and Geometric and 
Arithmetic Mean Length of Stay--FY 2016
Table 6B.--New Procedure Codes--FY 2016
Table 6I.--Proposed Complete Major CC List--FY 2016
Table 6J.--Proposed Complete CC List--FY 2016
Table 6K.--Proposed Complete List of CC Exclusions--FY 2016
Table 6L.--Proposed Principal Diagnosis Is Its Own MCC List--FY 2016
Table 6M.--Proposed Principal Diagnosis Is Its Own CC List--FY 2016
Table 6M.1.--Proposed Additions to the Principal Diagnosis Is Its 
Own CC List--FY 2016
Table 6P.--ICD-10-PCS Code Translations for Proposed MS-DRG 
Changes--FY 2016
Table 7A.--Medicare Prospective Payment System Selected Percentile 
Lengths of Stay: FY 2014 MedPAR Update--December 2014 GROUPER V32.0 
MS-DRGs
Table 7B.--Medicare Prospective Payment System Selected Percentile 
Lengths of Stay: FY 2014 MedPAR Update--December 2014 GROUPER V33.0 
MS-DRGs
Table 8A.--Proposed FY 2016 Statewide Average Operating Cost-to-
Charge Ratios (CCRs) for Acute Care Hospitals (Urban and Rural)
Table 8B.--Proposed FY 2016 Statewide Average Capital Cost-to-Charge 
Ratios (CCRs) for Acute Care Hospitals.
Table 10.--Proposed New Technology Add-On Payment Thresholds for 
Applications for FY 2017
Table 15.--Proposed FY 2016 Proxy Readmissions Adjustment Factors
Table 16.--Proposed Proxy Hospital Inpatient Value-Based Purchasing 
(VBP) Program Adjustment Factors for FY 2016
Table 18.--Proposed FY 2016 Medicare DSH Uncompensated Care Payment 
Factor 3

    The following LTCH PPS tables for this FY 2016 proposed rule are 
available only through the Internet on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/LongTermCareHospitalPPS/index.html under the list item for 
Regulation Number CMS-1632-P:

Table 8C.--Proposed FY 2016 Statewide Average Total Cost-to-Charge 
Ratios (CCRs) for LTCHs (Urban and Rural)
Table 11.--Proposed MS-LTC-DRGs, Relative Weights, Geometric Average 
Length of Stay, Short-Stay Outlier (SSO) Threshold, and ``IPPS 
Comparable Threshold'' for LTCH PPS Discharges Occurring from 
October 1, 2015 through September 30, 2016
Table 12A.--Proposed LTCH PPS Wage Index for Urban Areas for 
Discharges Occurring From October 1, 2015 through September 30, 2016
Table 12B.--Proposed LTCH PPS Wage Index for Rural Areas for 
Discharges Occurring from October 1, 2015 through September 30, 2016
Table 13A.--Proposed Composition of Low-Volume Quintiles for MS-LTC-
DRGs--FY 2016
Table 13B.--Proposed No-Volume MS-LTC-DRG Crosswalk for FY 2016

[[Page 24652]]



 Table 1A--Proposed National Adjusted Operating Standardized Amounts, Labor/Nonlabor (69.6 Percent Labor Share/30.4 Percent Nonlabor Share if Wage Index
                                                               Is Greater Than 1)--FY 2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
     Hospital submitted quality data and is a        Hospital did NOT submit quality   Hospital submitted quality data   Hospital did NOT submit quality
    meaningful EHR user (update = 1.9 percent)        data and is a meaningful EHR    and is NOT a meaningful EHR user  data and is NOT a meaningful EHR
---------------------------------------------------   user (update = 1.225 percent)        (update = 0.55 percent)       user (update = -0.125 percent)
                                                   -----------------------------------------------------------------------------------------------------
              Labor                    Nonlabor          Labor           Nonlabor          Labor           Nonlabor          Labor           Nonlabor
--------------------------------------------------------------------------------------------------------------------------------------------------------
$3,813.40........................       $1,665.63        $3,788.14        $1,654.60        $3,762.88        $1,643.56        $3,737.62        $1,632.53
--------------------------------------------------------------------------------------------------------------------------------------------------------


 Table 1B--Proposed National Adjusted Operating Standardized Amounts, Labor/Nonlabor (62 Percent Labor Share/38 Percent Nonlabor Share if Wage Index Is
                                                            Less Than or Equal to 1)--FY 2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
     Hospital submitted quality data and is a        Hospital did not submit quality   Hospital submitted quality data   Hospital did not submit quality
    meaningful EHR user (update = 1.9 percent)        data and is a meaningful EHR    and is not a meaningful EHR user  data and is not a meaningful EHR
---------------------------------------------------   user (update = 1.225 percent)        (update = 0.55 percent)       user (update = -0.125 percent)
                                                   -----------------------------------------------------------------------------------------------------
              Labor                    Nonlabor          Labor           Nonlabor          Labor           Nonlabor          Labor           Nonlabor
--------------------------------------------------------------------------------------------------------------------------------------------------------
$3,397.00........................       $2,082.03        $3,374.50        $2,068.24        $3,351.99        $2,054.45        $3,329.49        $2,040.66
--------------------------------------------------------------------------------------------------------------------------------------------------------


Table 1C--Proposed Adjusted Operating Standardized Amounts for Puerto Rico, Labor/Nonlabor (National: 62 Percent
 Labor Share/38 Percent Nonlabor Share Because Wage Index Is Less Than or Equal to 1; Puerto Rico: 63.2 Percent
  Labor Share/36.8 Percent Nonlabor Share if Wage Index Is Greater Than 1 or 62 Percent Labor Share/38 Percent
                        Nonlabor Share if Wage Index Is Less Than or Equal to 1--FY 2016
----------------------------------------------------------------------------------------------------------------
                                                  Rates if wage index is greater    Rates if wage index is less
                                                              than 1                    than or equal to 1
               Standardized amount               ---------------------------------------------------------------
                                                       Labor         Nonlabor          Labor         Nonlabor
----------------------------------------------------------------------------------------------------------------
National \1\....................................              NA              NA       $3,397.00       $2,082.03
Puerto Rico.....................................       $1,638.15         $953.86        1,607.05          984.96
----------------------------------------------------------------------------------------------------------------
\1\ For FY 2016, there are no CBSAs in Puerto Rico with a national wage index greater than 1.


   Table 1D--Proposed Capital Standard Federal Payment Rates--FY 2016
------------------------------------------------------------------------
                                                               Rate
------------------------------------------------------------------------
National................................................         $468.51
Puerto Rico.............................................          230.93
------------------------------------------------------------------------


       Table 1E-- Proposed LTCH PPS Standard Federal Rate--FY 2016
------------------------------------------------------------------------
                                                          Reduced update
                                          Full update        * (-0.1
                                         (1.9 percent)       percent)
------------------------------------------------------------------------
Standard Federal Rate.................      $41,883.93       $41,061.87
------------------------------------------------------------------------
* For LTCHs that fail to submit quality reporting data for FY 2016 in
  accordance with the LTCH Quality Reporting Program (LTCHQRP), the
  annual update is reduced by 2.0 percentage points as required by
  section 1886(m)(5) of the Act.

Appendix A: Economic Analyses

I. Regulatory Impact Analysis

A. Introduction

    We have examined the impacts of this proposed rule as required 
by Executive Order 12866 on Regulatory Planning and Review 
(September 30, 1993), Executive Order 13563 on Improving Regulation 
and Regulatory Review (February 2, 2011), the Regulatory Flexibility 
Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) of 
the Social Security Act, section 202 of the Unfunded Mandates Reform 
Act of 1995 (March 22, 1995, Pub. L. 104-4), Executive Order 13132 
on Federalism (August 4, 1999), and the Congressional Review Act (5 
U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that 
maximize net benefits (including potential economic, environmental, 
public health and safety effects, distributive impacts, and equity). 
Executive Order 13563 emphasizes the importance of quantifying both 
costs and benefits, of reducing costs, of harmonizing rules, and of 
promoting flexibility. A regulatory impact analysis (RIA) must be 
prepared for major rules with economically significant effects ($100 
million or more in any 1 year).
    We have determined that this proposed rule is a major rule as 
defined in 5 U.S.C. 804(2). We estimate that the proposed changes 
for FY 2016 acute care hospital operating and capital payments will 
redistribute amounts in excess of $100 million to acute care 
hospitals. The applicable percentage increase to the IPPS rates 
required by the statute, in conjunction with other proposed payment 
changes in this proposed rule, would result in an estimated

[[Page 24653]]

$278 million increase in proposed FY 2016 operating payments (or 0.3 
percent change) and an estimated $160 million increase in proposed 
FY 2016 capital payments (or 2.0 percent change). These proposed 
changes are relative to payments made in FY 2015. The impact 
analysis of the proposed capital payments can be found in section 
I.I. of this Appendix. In addition, as described in section I.J. of 
this Appendix, LTCHs are expected to experience a decrease in 
payments by $250 million in FY 2016 relative to FY 2015.
    Our operating impact estimate includes the proposed -0.8 percent 
documentation and coding adjustment applied to the IPPS standardized 
amount, which represents part of the recoupment required under 
section 631 of the ATRA. In addition, our operating payment impact 
estimate includes the proposed 1.9 percent hospital update to the 
standardized amount (which includes the estimated 2.7 percent market 
basket update less 0.6 percentage point for the proposed multifactor 
productivity adjustment and less 0.2 percentage point required under 
the Affordable Care Act). The estimates of proposed IPPS operating 
payments to acute care hospitals do not reflect any changes in 
hospital admissions or real case-mix intensity, which will also 
affect overall proposed payment changes.
    The analysis in this Appendix, in conjunction with the remainder 
of this document, demonstrates that this proposed rule is consistent 
with the regulatory philosophy and principles identified in 
Executive Orders 12866 and 13563, the RFA, and section 1102(b) of 
the Act. This proposed rule would affect payments to a substantial 
number of small rural hospitals, as well as other classes of 
hospitals, and the effects on some hospitals may be significant. 
Finally, in accordance with the provisions of Executive Order 12866, 
the Executive Office of Management and Budget has reviewed this 
proposed rule.

B. Statement of Need

    This proposed rule is necessary in order to make payment and 
policy changes under the Medicare IPPS for Medicare acute care 
hospital inpatient services for operating and capital-related costs 
as well as for certain hospitals and hospital units excluded from 
the IPPS. This proposed rule also is necessary to make payment and 
policy changes for Medicare hospitals under the LTCH PPS payment 
system.

C. Objectives of the IPPS

    The primary objective of the IPPS is to create incentives for 
hospitals to operate efficiently and minimize unnecessary costs 
while at the same time ensuring that payments are sufficient to 
adequately compensate hospitals for their legitimate costs in 
delivering necessary care to Medicare beneficiaries. In addition, we 
share national goals of preserving the Medicare Hospital Insurance 
Trust Fund.
    We believe that the changes in this proposed rule would further 
each of these goals while maintaining the financial viability of the 
hospital industry and ensuring access to high quality health care 
for Medicare beneficiaries. We expect that these proposed changes 
will ensure that the outcomes of the prospective payment systems are 
reasonable and equitable while avoiding or minimizing unintended 
adverse consequences.

D. Limitations of Our Analysis

    The following quantitative analysis presents the projected 
effects of our proposed policy changes, as well as statutory changes 
effective for FY 2016, on various hospital groups. We estimate the 
effects of individual proposed policy changes by estimating payments 
per case while holding all other payment policies constant. We use 
the best data available, but, generally, we do not attempt to make 
adjustments for future changes in such variables as admissions, 
lengths of stay, or case-mix.

E. Hospitals Included In and Excluded From the IPPS

    The prospective payment systems for hospital inpatient operating 
and capital-related costs of acute care hospitals encompass most 
general short-term, acute care hospitals that participate in the 
Medicare program. There were 32 Indian Health Service hospitals in 
our database, which we excluded from the analysis due to the special 
characteristics of the prospective payment methodology for these 
hospitals. Among other short-term, acute care hospitals, hospitals 
in Maryland are paid in accordance with the Maryland All-Payer 
Model, and hospitals located outside the 50 States, the District of 
Columbia, and Puerto Rico (that is, 5 short-term acute care 
hospitals located in the U.S. Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa) receive payment for inpatient 
hospital services they furnish on the basis of reasonable costs, 
subject to a rate-of-increase ceiling.
    As of March 2015, there were 3,366 IPPS acute care hospitals 
included in our analysis. This represents approximately 56 percent 
of all Medicare-participating hospitals. The majority of this impact 
analysis focuses on this set of hospitals. There also are 
approximately 1,329 CAHs. These small, limited service hospitals are 
paid on the basis of reasonable costs rather than under the IPPS. 
IPPS-excluded hospitals and units, which are paid under separate 
payment systems, include IPFs, IRFs, LTCHs, RNHCIs, children's 
hospitals, 11 cancer hospitals, and 5 short-term acute care 
hospitals located in the Virgin Islands, Guam, the Northern Mariana 
Islands, and American Samoa. Changes in the prospective payment 
systems for IPFs and IRFs are made through separate rulemaking. 
Payment impacts for these IPPS-excluded hospitals and units are not 
included in this proposed rule. The impact of the proposed update 
and proposed policy changes to the LTCH PPS for FY 2016 is discussed 
in section I.J. of this Appendix.

F. Effects on Hospitals and Hospital Units Excluded From the IPPS

    As of March 2015, there were 99 children's hospitals, 11 cancer 
hospitals, 5 short-term acute care hospitals located in the Virgin 
Islands, Guam, the Northern Mariana Islands and American Samoa, and 
18 RNHCIs being paid on a reasonable cost basis subject to the rate-
of-increase ceiling under Sec.  413.40. (In accordance with Sec.  
403.752(a) of the regulation, RNHCIs are paid under Sec.  413.40.) 
Among the remaining providers, 248 rehabilitation hospitals and 884 
rehabilitation units, and approximately 430 LTCHs, are paid the 
Federal prospective per discharge rate under the IRF PPS and the 
LTCH PPS, respectively, and 495 psychiatric hospitals and 1,122 
psychiatric units are paid the Federal per diem amount under the IPF 
PPS. As stated above, IRFs and IPFs are not affected by the rate 
updates discussed in this proposed rule. The impacts of the proposed 
changes on LTCHs are discussed in section I.J. of this Appendix.
    For children's hospitals, the 11 cancer hospitals, the 5 short-
term acute care hospitals located in the Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa, and RNHCIs, the update 
of the rate-of-increase limit (or target amount) is the estimated FY 
2016 percentage increase in the IPPS operating market basket, 
consistent with section 1886(b)(3)(B)(ii) of the Act, and Sec. Sec.  
403.752(a) and 413.40 of the regulations. As discussed in section 
IV. of the preamble of the FY 2014 IPPS/LTCH PPS final rule, we 
rebased the IPPS operating market basket to a FY 2010 base year. 
Therefore, we are using the percentage increase in the FY 2010-based 
IPPS operating market basket to update the target amounts for FY 
2016 and subsequent fiscal years for children's hospitals, the 11 
cancer hospitals, the 5 short-term acute care hospitals located in 
the Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa, and RNHCIs that are paid based on reasonable costs subject to 
the rate-of-increase limits. Consistent with current law, based on 
IHS Global Insight, Inc.'s first quarter 2015 forecast of the FY 
2010-based market basket increase, we are estimating that the FY 
2016 update based on the IPPS operating market basket is 2.7 percent 
(that is, the current estimate of the market basket rate-of-
increase). However, the Affordable Care Act requires an adjustment 
for multifactor productivity (currently estimated to be 0.6 
percentage point for FY 2016) and a 0.2 percentage point reduction 
to the market basket update resulting in a proposed 1.9 percent 
applicable percentage increase for IPPS hospitals that submit 
quality data and are meaningful EHR users, as discussed in section 
IV.A. of the preamble of this proposed rule. Children's hospitals, 
the 11 cancer hospitals, the 5 short-term acute care hospitals 
located in the Virgin Islands, Guam, the Northern Mariana Islands, 
and American Samoa, and RNCHIs that continue to be paid based on 
reasonable costs subject to rate-of-increase limits under Sec.  
413.40 of the regulations are not subject to the reductions in the 
applicable percentage increase required under the Affordable Care 
Act. Therefore, for those hospitals paid under Sec.  413.40 of the 
regulations, the update is the percentage increase in the FY 2016 
IPPS operating market basket, estimated at 2.7 percent, without the 
reductions described above under the Affordable Care Act.
    The impact of the update in the rate-of-increase limit on those 
excluded hospitals depends on the cumulative cost increases

[[Page 24654]]

experienced by each excluded hospital since its applicable base 
period. For excluded hospitals that have maintained their cost 
increases at a level below the rate-of-increase limits since their 
base period, the major effect is on the level of incentive payments 
these excluded hospitals receive. Conversely, for excluded hospitals 
with cost increases above the cumulative update in their rate-of-
increase limits, the major effect is the amount of excess costs that 
will not be paid.
    We note that, under Sec.  413.40(d)(3), an excluded hospital 
that continues to be paid under the TEFRA system and whose costs 
exceed 110 percent of its rate-of-increase limit receives its rate-
of-increase limit plus the lesser of: (1) 50 percent of its 
reasonable costs in excess of 110 percent of the limit, or (2) 10 
percent of its limit. In addition, under the various provisions set 
forth in Sec.  413.40, hospitals can obtain payment adjustments for 
justifiable increases in operating costs that exceed the limit.

G. Quantitative Effects of the Proposed Policy Changes Under the 
IPPS for Operating Costs

1. Basis and Methodology of Estimates

    In this proposed rule, we are announcing proposed policy changes 
and proposed payment rate updates for the IPPS for FY 2016 for 
operating costs of acute care hospitals. The proposed FY 2016 
updates to the capital payments to acute care hospitals are 
discussed in section I.I. of this Appendix.
    Based on the overall percentage change in payments per case 
estimated using our payment simulation model, we estimate that total 
FY 2016 operating payments will increase by 0.3 percent compared to 
FY 2015. In addition to the applicable percentage increase, this 
amount reflects the proposed FY 2016 recoupment adjustment for 
documentation and coding described in section II.D. of the preamble 
of this proposed rule of -0.8 percent to the IPPS national 
standardized amounts. The impacts do not reflect changes in the 
number of hospital admissions or real case-mix intensity, which will 
also affect overall payment changes.
    We have prepared separate impact analyses of the proposed 
changes to each system. This section deals with the proposed changes 
to the operating inpatient prospective payment system for acute care 
hospitals. Our payment simulation model relies on the most recent 
available data to enable us to estimate the impacts on payments per 
case of certain changes in this proposed rule. However, there are 
other proposed changes for which we do not have data available that 
will allow us to estimate the payment impacts using this model. For 
those proposed changes, we have attempted to predict the payment 
impacts based upon our experience and other more limited data.
    The data used in developing the quantitative analyses of 
proposed changes in payments per case presented below are taken from 
the FY 2014 MedPAR file and the most current Provider-Specific File 
(PSF) that is used for payment purposes. Although the analyses of 
the proposed changes to the operating PPS do not incorporate cost 
data, data from the most recently available hospital cost reports 
were used to categorize hospitals. Our analysis has several 
qualifications. First, in this analysis, we do not make adjustments 
for future changes in such variables as admissions, lengths of stay, 
or underlying growth in real case-mix. Second, due to the 
interdependent nature of the IPPS payment components, it is very 
difficult to precisely quantify the impact associated with each 
proposed change. Third, we use various data sources to categorize 
hospitals in the tables. In some cases, particularly the number of 
beds, there is a fair degree of variation in the data from the 
different sources. We have attempted to construct these variables 
with the best available source overall. However, for individual 
hospitals, some miscategorizations are possible.
    Using cases from the FY 2014 MedPAR file, we simulated payments 
under the operating IPPS given various combinations of payment 
parameters. As described above, Indian Health Service hospitals and 
hospitals in Maryland were excluded from the simulations. The 
proposed impact of payments under the capital IPPS, or the proposed 
impact of payments for costs other than inpatient operating costs, 
are not analyzed in this section. Estimated payment impacts of the 
capital IPPS for FY 2016 are discussed in section I.I. of this 
Appendix.
    We discuss the following changes below:
     The effects of the proposed application of the 
documentation and coding adjustment and the applicable percentage 
increase (including the proposed market basket update, the proposed 
multifactor productivity adjustment, and the applicable percentage 
reduction in accordance with the Affordable Care Act) to the 
standardized amount and hospital-specific rates.
     The effects of the proposed changes to the relative 
weights and MS-DRG GROUPER.
     The effects of the proposed changes in hospitals' wage 
index values reflecting updated wage data from hospitals' cost 
reporting periods beginning during FY 2012, compared to the FY 2011 
wage data, to calculate the proposed FY 2016 wage index.
     The combined effects of the proposed recalibration of 
the MS-DRG relative weights as required by section 1886(d)(4)(C) of 
the Act and the proposed wage index (including the updated wage data 
and the continued implementation of the new OMB labor market area 
delineations), including the proposed wage and recalibration budget 
neutrality factors.
     The effects of the geographic reclassifications by the 
MGCRB (as of publication of this proposed rule) that would be 
effective for FY 2016.
     The effects of the proposed rural floor and imputed 
floor with the application of the proposed national budget 
neutrality factor to the wage index.
     The effects of the second year of the 3-year transition 
for urban hospitals that were located in an urban county that become 
rural under the new OMB delineations or hospitals deemed urban where 
the urban area became rural under the new OMB delineations.
     The effects of the proposed frontier State wage index 
adjustment under the statutory provision that requires that 
hospitals located in States that qualify as frontier States to not 
have a wage index less than 1.0. This provision is not budget 
neutral.
     The effects of the implementation of section 
1886(d)(13) of the Act, as added by section 505 of Public Law 108-
173, which provides for an increase in a hospital's wage index if a 
threshold percentage of residents of the county where the hospital 
is located commute to work at hospitals in counties with higher wage 
indexes. This provision is not budget neutral.
     The total estimated change in payments based on the 
proposed FY 2016 policies relative to payments based on FY 2015 
policies that include the applicable percentage increase of 1.9 
percent (or 2.7 percent market basket update with a proposed 
reduction of 0.6 percentage point for the multifactor productivity 
adjustment, and a 0.2 percentage point reduction, as required under 
the Affordable Care Act).
    To illustrate the impact of the proposed FY 2016 changes, our 
analysis begins with a FY 2015 baseline simulation model using: the 
FY 2015 applicable percentage increase of 2.2 percent and the 
documentation and coding recoupment adjustment of -0.8 percent to 
the Federal standardized amount; the FY 2015 MS-DRG GROUPER (Version 
32); the FY 2015 CBSA designations for hospitals based on the new 
OMB definitions; the FY 2015 wage index; and no MGCRB 
reclassifications. Outlier payments are set at 5.1 percent of total 
operating MS-DRG and outlier payments for modeling purposes.
    Section 1886(b)(3)(B)(viii) of the Act, as added by section 
5001(a) of Public Law 109-171, as amended by section 4102(b)(1)(A) 
of the ARRA (Pub. L. 111-5) and by section 3401(a)(2) of the 
Affordable Care Act (Pub. L. 111-148), provides that, for FY 2007 
and each subsequent year through FY 2014, the update factor will 
include a reduction of 2.0 percentage points for any subsection (d) 
hospital that does not submit data on measures in a form and manner 
and at a time specified by the Secretary. Beginning in FY 2015, the 
reduction is one-quarter of such applicable percentage increase 
determined without regard to section 1886(b)(3)(B)(ix), (xi), or 
(xii) of the Act, or one-quarter of the market basket update. 
Therefore, for FY 2016, we are proposing that hospitals that do not 
submit quality information under rules established by the Secretary 
and that are meaningful EHR users under section 1886(b)(3)(B)(ix) of 
the Act would receive an applicable percentage increase of 1.225 
percent. At the time that this impact was prepared, 26 hospitals are 
estimated to not receive the full market basket rate-of-increase for 
FY 2015 because they failed the quality data submission process or 
did not choose to participate. For purposes of the simulations shown 
below, we modeled the proposed payment changes for FY 2016 using a 
proposed reduced update for these 26 hospitals. However, we do not 
have enough information at this time to determine which hospitals 
will not receive the full update factor for FY 2016.
    For FY 2016, in accordance with section 1886(b)(3)(B)(ix) of the 
Act, a hospital that has been identified as not an meaningful EHR 
user will be subject to a reduction of one-half of such applicable 
percentage increase determined without regard to section 
1886(b)(3)(B)(ix), (xi), or (xii) of the Act.

[[Page 24655]]

Therefore, for FY 2016, we are proposing that hospitals that are 
identified as not meaningful EHR users and do submit quality 
information under section 1886(b)(3)(B)(viii) of the Act would 
receive an applicable percentage increase of 0.55 percent. At the 
time that this impact analysis was prepared, 153 hospitals are 
estimated to not receive the full market basket rate-of-increase for 
FY 2015 because they are identified as not meaningful EHR users that 
do submit quality information under section 1886(b)(3)(B)(viii) of 
the Act. For purposes of the simulations shown below, we modeled the 
proposed payment changes for FY 2016 using a proposed reduced update 
for these 153 hospitals. We did not include these hospitals in the 
model for estimation purposes for FY 2015 because that was the first 
year hospitals experienced a reduction to their applicable 
percentage increase due to whether they are meaningful EHR users and 
data were not available at that time. However, we believe it is 
appropriate to include these 153 hospitals for estimation purposes 
in FY 2016 because FY 2016 will be the second year in which 
hospitals will experience this reduction and data on the prior 
year's performance are now available. For purposes of the 
simulations shown below, we modeled the proposed payment changes for 
FY 2016 using a proposed reduced update for these 153 hospitals. 
However, we do not have enough information at this time to determine 
which hospitals will not receive the full update increase for FY 
2016.
    Hospitals that are identified as not meaningful EHR users under 
section 1886(b)(3)(B)(ix) of the Act and also do not submit quality 
data under section 1886(b)(3)(B)(viii) of the Act would receive an 
applicable percentage increase of -0.125 percent, which reflects a 
one-quarter reduction of the market basket update for failure to 
submit quality data and a one-half reduction of the market basket 
update for being identified as not a meaningful EHR user. At the 
time that this impact was prepared, 24 hospitals are estimated to 
not receive the full market basket rate-of-increase for FY 2016 
because they are identified as not meaningful EHR users that do not 
submit quality data under section 1886(b)(3)(B)(viii) of the Act. We 
did not include these hospitals in the model for estimation purposes 
for FY 2015 because that was the first year hospitals experienced a 
reduction to their applicable percentage increase due to whether 
they are meaningful EHR users and data were not available at that 
time. However, we believe it is appropriate to include these 24 
hospitals for estimation purposes in FY 2016 because FY 2016 will be 
the second year in which hospitals will experience this reduction 
and data on the prior year's performance are now available. For 
purposes of the simulations shown below, we modeled the proposed 
payment changes for FY 2016 using a proposed reduced update for 
these 24 hospitals. However, we do not have enough information at 
this time to determine which hospitals will not receive the full 
update increase for FY 2016.
    Each proposed policy change, statutory or otherwise, is then 
added incrementally to this baseline, finally arriving at an FY 2016 
model incorporating all of the proposed changes. This simulation 
allows us to isolate the effects of each proposed change.
    Our final comparison illustrates the percent change in payments 
per case from FY 2015 to FY 2016. Three factors not discussed 
separately have significant impacts here. The first factor is the 
proposed update to the standardized amount. In accordance with 
section 1886(b)(3)(B)(i) of the Act, we are proposing to update the 
standardized amounts for FY 2016 using a proposed applicable 
percentage increase of 1.9 percent. This includes our forecasted 
IPPS operating hospital market basket increase of 2.7 percent with a 
proposed reduction of 0.6 percentage point for the multifactor 
productivity adjustment and a 0.2 percentage point reduction as 
required under the Affordable Care Act. Hospitals that fail to 
comply with the quality data submission requirements and are 
meaningful EHR users would receive a proposed update of 1.225 
percent. This proposed update includes a reduction of one-quarter of 
the market basket update for failure to submit these data. Hospitals 
that do comply with the quality data submission requirements but are 
not meaningful EHR users would receive an update of 0.55 percent, 
which includes a reduction of one-half of the market basket update. 
Furthermore, hospitals that do not comply with the quality data 
submission requirements and also are not meaningful EHR users would 
receive an update of -0.125 percent. Under section 1886(b)(3)(B)(iv) 
of the Act, the update to the hospital-specific amounts for SCHs 
also are equal to the applicable percentage increase, or 1.9 percent 
if the hospital submits quality data and is a meaningful EHR user. 
In addition, we are proposing to update the Puerto Rico-specific 
amount by an applicable percentage increase of 1.9 percent.
    A second significant factor that affects the proposed changes in 
hospitals' payments per case from FY 2015 to FY 2016 is the change 
in hospitals' geographic reclassification status from one year to 
the next. That is, payments may be reduced for hospitals 
reclassified in FY 2015 that are no longer reclassified in FY 2016. 
Conversely, payments may increase for hospitals not reclassified in 
FY 2015 that are reclassified in FY 2016.
    A third significant factor is that we currently estimate that 
actual outlier payments during FY 2015 will be 4.9 percent of total 
MS-DRG payments. When the FY 2015 IPPS/LTCH PPS final rule was 
published, we projected FY 2015 outlier payments would be 5.1 
percent of total MS-DRG plus outlier payments; the average 
standardized amounts were offset correspondingly. The effects of the 
lower than expected outlier payments during FY 2015 (as discussed in 
the Addendum to this proposed rule) are reflected in the analyses 
below comparing our current estimates of FY 2015 payments per case 
to estimated proposed FY 2016 payments per case (with outlier 
payments projected to equal 5.1 percent of total MS-DRG payments).

2. Analysis of Table I

    Table I displays the results of our analysis of the proposed 
changes for FY 2016. The table categorizes hospitals by various 
geographic and special payment consideration groups to illustrate 
the varying impacts on different types of hospitals. The top row of 
the table shows the overall impact on the 3,366 acute care hospitals 
included in the analysis.
    The next four rows of Table I contain hospitals categorized 
according to their geographic location: All urban, which is further 
divided into large urban and other urban; and rural. There are 2,530 
hospitals located in urban areas included in our analysis. Among 
these, there are 1,390 hospitals located in large urban areas 
(populations over 1 million), and 1,140 hospitals in other urban 
areas (populations of 1 million or fewer). In addition, there are 
836 hospitals in rural areas. The next two groupings are by bed-size 
categories, shown separately for urban and rural hospitals. The 
final groupings by geographic location are by census divisions, also 
shown separately for urban and rural hospitals.
    The second part of Table I shows hospital groups based on 
hospitals' proposed FY 2016 payment classifications, including any 
reclassifications under section 1886(d)(10) of the Act. For example, 
the rows labeled urban, large urban, other urban, and rural show 
that the numbers of hospitals paid based on these categorizations 
after consideration of geographic reclassifications (including 
reclassifications under sections 1886(d)(8)(B) and 1886(d)(8)(E) of 
the Act that have implications for capital payments) are 2,479; 
1,383; 1,096; and 887, respectively.
    The next three groupings examine the impacts of the proposed 
changes on hospitals grouped by whether or not they have GME 
residency programs (teaching hospitals that receive an IME 
adjustment) or receive Medicare DSH payments, or some combination of 
these two adjustments. There are 2,325 nonteaching hospitals in our 
analysis, 794 teaching hospitals with fewer than 100 residents, and 
247 teaching hospitals with 100 or more residents.
    In the DSH categories, hospitals are grouped according to their 
DSH payment status, and whether they are considered urban or rural 
for DSH purposes. The next category groups together hospitals 
considered urban or rural, in terms of whether they receive the IME 
adjustment, the DSH adjustment, both, or neither.
    The next three rows examine the impacts of the proposed changes 
on rural hospitals by special payment groups (SCHs, RRCs). There 
were 211 RRCs, 327 SCHs, and 125 hospitals that are both SCHs and 
RRCs.
    The next series of groupings are based on the type of ownership 
and the hospital's Medicare utilization expressed as a percent of 
total patient days. These data were taken from the FY 2013 or FY 
2012 Medicare cost reports.
    The next two groupings concern the geographic reclassification 
status of hospitals. The first grouping displays all urban hospitals 
that were reclassified by the MGCRB for FY 2016. The second grouping 
shows the MGCRB rural reclassifications.

[[Page 24656]]

The final category shows the impact of the proposed policy changes 
on the 14 cardiac hospitals.
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[GRAPHIC] [TIFF OMITTED] TP30AP15.005


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[GRAPHIC] [TIFF OMITTED] TP30AP15.006


[[Page 24661]]



a. Effects of the Proposed Hospital Update and Documentation and Coding 
Adjustment (Column 2)

    As discussed in section II.D. of the preamble of this proposed 
rule, this column includes the proposed hospital update, including 
the proposed 2.7 percent market basket update, the proposed 
reduction of 0.6 percentage point for the multifactor productivity 
adjustment, and the 0.2 percentage point reduction in accordance 
with the Affordable Care Act. In addition, this column includes the 
proposed FY 2016 documentation and coding recoupment adjustment of -
0.8 percent on the national standardized amount as part of the 
recoupment required by section 631 of the ATRA. As a result, we are 
proposing to make a 1.1 percent update to the national standardized 
amount. This column also includes the proposed 1.9 percent update to 
the hospital-specific rates which includes the proposed 2.7 percent 
market basket update, the proposed reduction of 0.6 percentage point 
for the multifactor productivity adjustment, and the 0.2 percentage 
point reduction in accordance with the Affordable Care Act.
    Overall, hospitals would experience a 1.1 percent increase in 
payments primarily due to the combined effects of the proposed 
hospital update and the proposed documentation and coding adjustment 
on the national standardized amount and the proposed hospital update 
to the hospital-specific rate. Hospitals that are paid under the 
hospital-specific rate, namely SCHs, would experience a 1.9 percent 
increase in payments; therefore, hospital categories with SCHs paid 
under the hospital-specific rate would experience increases in 
payments of more than 1.1 percent.

b. Effects of the Proposed Changes to the MS-DRG Reclassifications and 
Relative Cost-Based Weights With Recalibration Budget Neutrality 
(Column 3)

    Column 3 shows the effects of the proposed changes to the MS-
DRGs and relative weights with the application of the recalibration 
budget neutrality factor to the standardized amounts. Section 
1886(d)(4)(C)(i) of the Act requires us annually to make appropriate 
classification changes in order to reflect changes in treatment 
patterns, technology, and any other factors that may change the 
relative use of hospital resources. Consistent with section 
1886(d)(4)(C)(iii) of the Act, we are calculating a recalibration 
budget neutrality factor to account for the changes in MS-DRGs and 
relative weights to ensure that the overall payment impact is budget 
neutral.
    As discussed in section II.E. of the preamble of this proposed 
rule, the FY 2016 MS-DRG relative weights will be 100 percent cost-
based and 100 percent MS-DRGs. For FY 2016, the MS-DRGs are 
calculated using the FY 2014 MedPAR data grouped to the Version 33 
(FY 2016) MS-DRGs. The methodology to calculate the relative weights 
and the reclassification changes to the GROUPER are described in 
more detail in section II.H. of the preamble of this proposed rule.
    The ``All Hospitals'' line in Column 3 indicates that proposed 
changes due to the MS-DRGs and relative weights would result in a 
0.0 percent change in payments with the application of the proposed 
recalibration budget neutrality factor of 0.998335 on to the 
standardized amount. Hospital categories that generally treat more 
surgical cases than medical cases would experience increases in 
their payments under the proposed relative weights. Rural hospitals 
would experience a 0.2 percent decrease in payments because rural 
hospitals tend to treat fewer surgical cases than medical cases, 
while teaching hospitals with more than 100 residents would 
experience an increase in payments by 0.1 percent as those hospitals 
treat more surgical cases than medical cases.

c. Effects of the Proposed Wage Index Changes (Column 4)

    Column 4 shows the impact of proposed updated wage data using FY 
2012 cost report data, with the application of the proposed wage 
budget neutrality factor. The wage index is calculated and assigned 
to hospitals on the basis of the labor market area in which the 
hospital is located. Under section 1886(d)(3)(E) of the Act, 
beginning with FY 2005, we delineate hospital labor market areas 
based on the Core Based Statistical Areas (CBSAs) established by 
OMB. The current statistical standards used in FY 2016 are based on 
OMB standards published on February 28, 2013 (75 FR 37246 and 
37252), and 2010 Decennial Census data (OMB Bulletin No. 13-01). (We 
refer readers to the FY 2015 IPPS/LTCH PPS final rule (79 FR 49951 
through 49963) for a full discussion on our adoption of the OMB 
labor market area delineations based on the 2010 Decennial Census 
data, effective beginning with the FY 2015 IPPS wage index).
    Section 1886(d)(3)(E) of the Act requires that, beginning 
October 1, 1993, we annually update the wage data used to calculate 
the wage index. In accordance with this requirement, the proposed 
wage index for acute care hospitals for FY 2016 is based on data 
submitted for hospital cost reporting periods beginning on or after 
October 1, 2011 and before October 1, 2012. The estimated impact of 
the proposed updated wage data using the FY 2012 cost report data 
and the OMB labor market area delineations on hospital payments is 
isolated in Column 4 by holding the other payment parameters 
constant in this simulation. That is, Column 4 shows the proposed 
percentage change in payments when going from a model using the FY 
2015 wage index, based on FY 2011 wage data, the labor-related share 
of 69.6 percent, under the OMB delineations and having a 100-percent 
occupational mix adjustment applied, to a model using the FY 2016 
pre-reclassification wage index based on FY 2012 wage data with the 
labor-related share of 69.6 percent, under the new OMB delineations, 
also having a 100-percent occupational mix adjustment applied, while 
holding other proposed payment parameters such as use of the Version 
33 MS-DRG GROUPER constant. The proposed FY 2016 occupational mix 
adjustment is based on the CY 2013 occupational mix survey.
    In addition, the column shows the impact of the application of 
the proposed wage budget neutrality to the national standardized 
amount. In FY 2010, we began calculating separate wage budget 
neutrality and recalibration budget neutrality factors, in 
accordance with section 1886(d)(3)(E) of the Act, which specifies 
that budget neutrality to account for wage index changes or updates 
made under that subparagraph must be made without regard to the 62 
percent labor-related share guaranteed under section 
1886(d)(3)(E)(ii) of the Act. Therefore, for FY 2016, we are 
calculating the wage budget neutrality factor to ensure that 
payments under updated wage data and the labor-related share of 69.6 
percent are budget neutral without regard to the lower labor-related 
share of 62 percent applied to hospitals with a wage index less than 
or equal to 1.0. In other words, the wage budget neutrality is 
calculated under the assumption that all hospitals receive the 
higher labor-related share of the standardized amount. The proposed 
FY 2016 wage budget neutrality factor is 0.998681, and the proposed 
overall payment change is 0.0 percent.
    Column 4 shows the impacts of updating the wage data using FY 
2012 cost reports. Overall, the new wage data and the labor-related 
share, combined with the proposed wage budget neutrality adjustment, 
would lead to no change for all hospitals as shown in Column 4.
    In looking at the wage data itself, the proposed national 
average hourly wage increased 1.02 percent compared to FY 2015. 
Therefore, the only manner in which to maintain or exceed the 
previous year's wage index was to match or exceed the national 1.02 
percent increase in average hourly wage. Of the 3,302 hospitals with 
wage data for both FYs 2015 and 2016, 1,673 or 50.7 percent would 
experience an average hourly wage increase of 1.02 percent or more.
    The following chart compares the shifts in wage index values for 
hospitals due to proposed changes in the average hourly wage data 
for FY 2016 relative to FY 2015. Among urban hospitals, 9 would 
experience a decrease of 10 percent or more, and 13 urban hospitals 
would experience an increase of 10 percent or more. One hundred and 
fifty-four urban hospitals would experience an increase or decrease 
of at least 5 percent or more but less than 10 percent. Among rural 
hospitals, 9 would experience a decrease of at least 5 percent but 
less than 10 percent, but no rural hospitals would experience an 
increase of greater than or equal to 5 percent but less than 10 
percent. No rural hospital would experience increases or decreases 
of 10 percent or more. However, 806 rural hospitals would experience 
increases or decreases of less than 5 percent, while 2,305 urban 
hospitals would experience increases or decreases of less than 5 
percent. Six urban hospitals would not experience a change in their 
wage index, and all rural hospitals would experience a change in 
their proposed wage indexes. These figures reflect proposed changes 
in the ``pre-reclassified, occupational mix-adjusted wage index,'' 
that is, the proposed wage index before the application of proposed 
geographic reclassification, the proposed rural and imputed floors, 
the proposed out-migration adjustment, and other proposed wage index 
exceptions and adjustments. (We refer readers to sections

[[Page 24662]]

III.G.2. through III.I. of the preamble of this proposed rule for a 
complete discussion of the exceptions and adjustments to the wage 
index.) We note that the proposed ``post-reclassified wage index'' 
or proposed ``payment wage index,'' which is the proposed wage index 
that includes all such proposed exceptions and adjustments (as 
reflected in Tables 2 and 3 associated with this proposed rule, 
which are available via the Internet on the CMS Web site) is used to 
adjust the labor-related share of a hospital's standardized amount, 
either 69.6 percent or 62 percent, depending upon whether a 
hospital's wage index is greater than 1.0 or less than or equal to 
1.0. Therefore, the proposed pre-reclassified wage index figures in 
the chart below may illustrate a somewhat larger or smaller change 
than would occur in a hospital's proposed payment wage index and 
total payment.
    The following chart shows the projected impact of proposed 
changes in the area wage index values for urban and rural hospitals.

------------------------------------------------------------------------
                                                Number of hospitals
  Proposed FY 2016 percentage change in  -------------------------------
         area wage index values                Urban           Rural
------------------------------------------------------------------------
Increase 10 percent or more.............              13               0
Increase greater than or equal to 5                   60               0
 percent and less than 10 percent.......
Increase or decrease less than 5 percent           2,305             806
Decrease greater than or equal to 5                   94               9
 percent and less than 10 percent.......
Decrease 10 percent or more.............               9               0
Unchanged...............................               6               0
------------------------------------------------------------------------

d. Combined Effects of the Proposed MS-DRG and Wage Index Changes 
(Column 5)

    Section 1886(d)(4)(C)(iii) of the Act requires that changes to 
MS-DRG reclassifications and the relative weights cannot increase or 
decrease aggregate payments. In addition, section 1886(d)(3)(E) of 
the Act specifies that any updates or adjustments to the wage index 
are to be budget neutral. We computed a proposed wage budget 
neutrality factor of 0.998681 and a proposed recalibration budget 
neutrality factor of 0.998335 (which is also applied to the proposed 
Puerto Rico-specific standardized amount and the proposed hospital-
specific rates). The product of the two proposed budget neutrality 
factors is the proposed cumulative wage and recalibration budget 
neutrality factor. The proposed cumulative wage and recalibration 
budget neutrality adjustment is 0.997018, or approximately 0.3 
percent, which is applied to the national standardized amounts. 
Because the wage budget neutrality and the recalibration budget 
neutrality are calculated under different methodologies according to 
the statute, when the two budget neutralities are combined and 
applied to the standardized amount, the overall payment impact is 
not necessarily budget neutral. However, in this proposed rule, we 
are estimating that the proposed changes in the MS-DRG relative 
weights and proposed updated wage data with wage and budget 
neutrality applied would result in a 0.0 percent change in payments.

e. Effects of Proposed MGCRB Reclassifications (Column 6)

    Our impact analysis to this point has assumed acute care 
hospitals are paid on the basis of their actual geographic location 
(with the exception of ongoing policies that provide that certain 
hospitals receive payments on bases other than where they are 
geographically located). The proposed changes in Column 6 reflect 
the per case payment impact of moving from this baseline to a 
simulation incorporating the MGCRB decisions for FY 2016.
    By spring of each year, the MGCRB makes reclassification 
determinations that will be effective for the next fiscal year, 
which begins on October 1. The MGCRB may approve a hospital's 
reclassification request for the purpose of using another area's 
wage index value. Hospitals may appeal denials of MGCRB decisions to 
the CMS Administrator. Further, hospitals have 45 days from 
publication of the IPPS proposed rule in the Federal Register to 
decide whether to withdraw or terminate an approved geographic 
reclassification for the following year.
    The overall effect of geographic reclassification is required by 
section 1886(d)(8)(D) of the Act to be budget neutral. Therefore, 
for purposes of this impact analysis, we are proposing to apply an 
adjustment of 0.988486 to ensure that the effects of the 
reclassifications under section 1886(d)(10) of the Act are budget 
neutral (section II.A. of the Addendum to this proposed rule). 
Geographic reclassification generally benefits hospitals in rural 
areas. We estimate that the geographic reclassification would 
increase payments to rural hospitals by an average of 1.4 percent. 
By region, all the rural hospital categories would experience 
increases in payments due to MGCRB reclassifications.
    New Table 2 listed in section VI. of the Addendum to this 
proposed rule and available via the Internet on the CMS Web site 
reflects the proposed reclassifications for FY 2016.

f. Effects of the Proposed Rural and Imputed Floor, Including 
Application of National Budget Neutrality (Column 7)

    As discussed in section III.B. of the preamble of the FY 2009 
IPPS final rule, the FY 2010 IPPS/RY 2010 LTCH PPS final rule, the 
FYs 2011, 2012, 2013, 2014, and 2015 IPPS/LTCH PPS final rules, and 
this proposed rule, section 4410 of Public Law 105-33 established 
the rural floor by requiring that the wage index for a hospital in 
any urban area cannot be less than the wage index received by rural 
hospitals in the same State. We apply a uniform budget neutrality 
adjustment to the wage index. The imputed floor, which is also 
included in the calculation of the budget neutrality adjustment to 
the wage index, was extended in FY 2012 for 2 additional years and 
in FY 2014 and FY 2015 for 1 additional year. Prior to FY 2013, only 
urban hospitals in New Jersey received the imputed floor. As 
discussed in the FY 2013 IPPS/LTCH PPS final rule (77 FR 53369), we 
established an alternative temporary methodology for the imputed 
floor, which resulted in an imputed floor for Rhode Island for FY 
2013. For FY 2014 and FY 2015, we extended the imputed rural floor, 
as calculated under the original methodology and the alternative 
methodology. Due to the adoption of the new OMB labor market area 
delineations in FY 2015, the State of Delaware also became an all-
urban state and thus eligible for an imputed floor. For FY 2016, we 
are proposing to extend the imputed rural floor for 1 year, as 
calculated under the original methodology and the alternative 
methodology. As a result, New Jersey, Rhode Island, and Delaware 
would be able to receive an imputed floor. In New Jersey, 16 out of 
64 hospitals would receive the imputed floor, and 4 out of 11 
hospitals in Rhode Island would receive the imputed floor for FY 
2016. For FY 2016, no hospitals would benefit from the imputed floor 
in Delaware because the CBSA wage index for each CBSA in Delaware 
under the new OMB delineations is equal to or higher than the 
imputed rural floor.
    The Affordable Care Act requires that we apply one rural floor 
budget neutrality factor to the wage index nationally, and the 
imputed floor is part of the rural floor budget neutrality factor 
applied to the wage index nationally. We have calculated a proposed 
FY 2016 rural floor budget neutrality factor to be applied to the 
wage index of 0.990135, which would reduce proposed wage indexes by 
0.99 percent.
    Column 7 shows the projected impact of the proposed rural floor 
and imputed floor with the national rural floor budget neutrality 
factor applied to the wage index based on the OMB labor market area 
delineations. The column compares the proposed post-reclassification 
FY 2016 wage index of providers before the proposed rural floor and 
imputed floor adjustment and the proposed post-reclassification FY 
2016 wage index of providers with the proposed rural floor and 
imputed floor adjustment based on the OMB labor market area 
delineations. Only urban hospitals can benefit from the rural and 
imputed floors. Because the provision is budget neutral, all other 
hospitals (that is, all rural hospitals and those urban hospitals to 
which the adjustment is not made) would experience a decrease in 
payments due to the

[[Page 24663]]

budget neutrality adjustment that is applied nationally to their 
wage index.
    We estimate that 383 hospitals would benefit from the rural and 
imputed floors in FY 2016, while the remaining 2,983 IPPS hospitals 
in our model would have their wage index reduced by the proposed 
rural floor budget neutrality adjustment of 0.990135 (or 0.99 
percent). We project that, in aggregate, rural hospitals would 
experience a 0.3 percent decrease in payments as a result of the 
application of the proposed rural floor budget neutrality because 
the rural hospitals do not benefit from the rural floor, but have 
their wage indexes downwardly adjusted to ensure that the 
application of the rural floor is budget neutral overall. We project 
hospitals located in urban areas would experience no change in 
payments because increases in payments by hospitals benefitting from 
the rural floor offset decreases in payments by nonrural floor urban 
hospitals whose wage index is downwardly adjusted by the rural floor 
budget neutrality factor. Urban hospitals in the New England region 
would experience a 1.6 percent increase in payments primarily due to 
the application of the proposed rural floor in Massachusetts. 
Thirty-nine urban providers in Massachusetts are expected to receive 
the rural floor wage index value, including the proposed rural floor 
budget neutrality of 0.990135, increasing payments overall to 
Massachusetts by an estimated $98 million. We estimate that 
Massachusetts hospitals would receive approximately a 3.1 percent 
increase in IPPS payments due to the application of the proposed 
rural floor in FY 2016.
    Urban Puerto Rico hospitals are expected to experience a 0.1 
percent change in payments as a result of the application of the 
proposed Puerto Rico rural floor with the application of the 
proposed Puerto Rico rural floor budget neutrality adjustment. We 
are proposing to apply a rural floor budget neutrality factor to the 
Puerto Rico-specific wage index of 0.987626 or 1.2 percent. The 
Puerto Rico-specific wage index adjusts the Puerto Rico-specific 
standardized amount, which represents 25 percent of payments to 
Puerto Rico hospitals. The increases in payments experienced by the 
urban Puerto Rico hospitals that benefit from a rural floor are 
offset by the decreases in payments by the urban Puerto Rico 
hospitals that do not benefit from the rural floor that have their 
wage indexes downwardly adjusted by the rural floor budget 
neutrality adjustment. As a result, overall, urban Puerto Rico 
hospitals would experience a 0.1 percent change in payments due to 
the application of the proposed rural floor with rural floor budget 
neutrality.
    There are 16 hospitals out of the 64 hospitals in New Jersey 
that would benefit from the proposed extension of the imputed floor 
and would receive the proposed imputed floor wage index value under 
the OMB labor market area delineations, including the proposed rural 
floor budget neutrality of 0.990135 which we estimate would increase 
payments to those imputed floor hospitals by $20 million (overall, 
the State would not see an increase in payments due to the other 
hospitals in the State that would experience decreases in payments 
due to the proposed rural floor budget neutrality adjustment). Four 
Rhode Island hospitals would benefit from the proposed imputed rural 
floor calculated under the alternative methodology and would receive 
an additional $4.5 million (overall, the State would receive an 
additional $2.6 million). No hospitals would benefit from the 
proposed imputed floor in Delaware because the CBSA wage index for 
each CBSA in Delaware under the new OMB delineations is equal to or 
higher than the proposed imputed rural floor.
    Column 7 also shows the projected effects of the second year of 
the 3-year hold harmless provision for hospitals that were located 
in an urban county that became rural under the new OMB delineations 
or hospitals deemed urban where the urban area became rural under 
the new OMB delineations. As discussed in section III.G.2. of the 
preamble of this proposed rule, under this transition, hospitals 
that were located in an urban county that became rural under the new 
OMB delineations will generally be assigned the urban wage index 
value of the CBSA in which they are physically located in FY 2014 
for a period of 3 fiscal years (that is, FYs 2015, 2016, and 2017). 
In addition, as discussed in section III.G.3. of the preamble of 
this proposed rule, under this transition, hospitals that were 
deemed urban where the urban area became rural under the new OMB 
delineations will generally be assigned the area wage index value of 
hospitals reclassified to the urban CBSA (that is, the attaching 
wage index, if applicable) to which they were designated in FY 2014. 
For FY 2016, we are applying the 3-year transition wage index 
adjustments in a budget neutral manner, with a budget neutrality 
factor of 0.999995.
    In response to a public comment addressed in the FY 2012 IPPS/
LTCH PPS final rule (76 FR 51593), we are providing the payment 
impact of the proposed rural floor and imputed floor with budget 
neutrality at the State level. Column 1 of the table below displays 
the number of IPPS hospitals located in each State. Column 2 
displays the number of hospitals in each State that would receive 
the proposed rural floor or imputed floor wage index for FY 2016. 
Column 3 displays the percentage of total payments each State would 
receive or contribute to fund the rural floor and imputed floor with 
national budget neutrality. The column compares the proposed post-
reclassification FY 2016 wage index of providers before the proposed 
rural floor and imputed floor adjustment and the proposed post-
reclassification FY 2016 wage index of providers with the proposed 
rural floor and imputed floor adjustment. Column 4 displays the 
estimated payment amount that each State would gain or lose due to 
the application of the proposed rural floor and imputed floor with 
national budget neutrality.

                 Proposed FY 2016 IPPS Estimated Payments Due to Proposed Rural Floor and Imputed Floor With National Budget Neutrality
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                Proposed percent
                                                                                         Number of hospitals   change in payments
                                                                                         that would receive    due to application
                              State                                Number of hospitals   the proposed rural     of proposed rural    Proposed difference
                                                                                          floor or imputed      floor and imputed       (in millions)
                                                                                                floor           floor with budget
                                                                                                                   neutrality
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   (1)                   (2)                   (3)                   (4)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Alabama.........................................................                    86                     3                  -0.4                $-7.28
Alaska..........................................................                     6                     1                  -0.3                 -0.53
Arizona.........................................................                    55                     4                  -0.5                 -8.36
Arkansas........................................................                    46                     2                  -0.3                 -3.08
California......................................................                   303                   207                   2.4                233.75
Colorado........................................................                    47                     5                   0.3                  3.78
Connecticut.....................................................                    31                     7                  -0.5                 -7.46
Delaware........................................................                     6                     0                  -0.6                 -2.53
Washington, DC..................................................                     7                     0                  -0.5                  -2.4
Florida.........................................................                   170                    14                  -0.3                -16.98
Georgia.........................................................                   105                     0                  -0.5                -12.17
Hawaii..........................................................                    12                     1                  -0.4                 -1.11
Idaho...........................................................                    14                     0                  -0.4                 -1.17
Illinois........................................................                   127                     2                  -0.5                -24.84
Indiana.........................................................                    91                     0                  -0.5                -11.83

[[Page 24664]]

 
Iowa............................................................                    35                     0                  -0.5                  -4.3
Kansas..........................................................                    53                     0                  -0.4                  -3.7
Kentucky........................................................                    65                     1                  -0.4                 -7.09
Louisiana.......................................................                    98                     1                  -0.5                 -6.53
Maine...........................................................                    20                     0                  -0.5                  -2.4
Massachusetts...................................................                    61                    39                   3.1                  98.3
Michigan........................................................                    96                     0                  -0.5                -21.72
Minnesota.......................................................                    50                     0                  -0.3                  -6.2
Mississippi.....................................................                    64                     0                  -0.5                 -4.86
Missouri........................................................                    78                     2                  -0.4                 -8.38
Montana.........................................................                    12                     2                   0.2                  0.45
Nebraska........................................................                    25                     0                  -0.4                 -2.44
Nevada..........................................................                    24                     4                   0.3                  2.35
New Hampshire...................................................                    13                     2                  -0.2                 -1.19
New Jersey......................................................                    64                    16                     0                  0.43
New Mexico......................................................                    25                     0                  -0.3                 -1.37
New York........................................................                   156                     2                  -0.6                 -43.7
North Carolina..................................................                    84                     0                  -0.4                -14.21
North Dakota....................................................                     6                     0                  -0.3                 -0.81
Ohio............................................................                   132                     6                  -0.5                -17.27
Oklahoma........................................................                    86                     4                  -0.4                 -4.94
Oregon..........................................................                    34                     0                  -0.5                 -4.67
Pennsylvania....................................................                   153                     5                  -0.5                -21.49
Puerto Rico.....................................................                    51                    10                   0.1                  0.15
Rhode Island....................................................                    11                     4                   0.7                  2.59
South Carolina..................................................                    56                     5                  -0.2                 -2.38
South Dakota....................................................                    19                     0                  -0.3                 -0.97
Tennessee.......................................................                    99                    19                  -0.4                 -9.65
Texas...........................................................                   317                     3                  -0.5                -30.36
Utah............................................................                    34                     2                  -0.4                 -1.95
Vermont.........................................................                     6                     0                  -0.3                 -0.61
Virginia........................................................                    78                     1                  -0.4                -11.47
Washington......................................................                    49                     6                   0.1                  1.49
West Virginia...................................................                    29                     3                  -0.2                 -1.24
Wisconsin.......................................................                    66                     0                  -0.5                 -7.58
Wyoming.........................................................                    11                     0                  -0.2                 -0.24
--------------------------------------------------------------------------------------------------------------------------------------------------------

g. Effects of the Application of the Proposed Frontier State Wage Index 
and Proposed Out-Migration Adjustment (Column 8)

    This column shows the combined effects of the application of 
section 10324(a) of the Affordable Care Act, which requires that we 
establish a minimum post-reclassified wage-index of 1.00 for all 
hospitals located in ``frontier States,'' and the effects of section 
1886(d)(13) of the Act, as added by section 505 of Public Law 108-
173, which provides for an increase in the wage index for hospitals 
located in certain counties that have a relatively high percentage 
of hospital employees who reside in the county, but work in a 
different area with a higher wage index. These two wage index 
provisions are not budget neutral and increase payments overall by 
0.1 percent compared to the provisions not being in effect.
    The term ``frontier States'' is defined in the statute as States 
in which at least 50 percent of counties have a population density 
less than 6 persons per square mile. Based on these criteria, 4 
States (Montana, North Dakota, South Dakota, and Wyoming) are 
considered frontier States and 47 hospitals located in those States 
will receive a frontier wage index of 1.0000. Nevada is also, by 
definition, a frontier State and was assigned a frontier floor value 
of 1.0000 for FY 2012, but since then and including in this proposed 
rule, its rural floor value has been greater than 1.0000 so it has 
not been subject to the frontier wage index. Overall, this provision 
is not budget neutral and is estimated to increase IPPS operating 
payments by approximately $58 million. Rural and urban hospitals 
located in the West North Central region would experience an 
increase in payments by 0.3 and 0.8 percent, respectively, because 
many of the hospitals located in this region are frontier State 
hospitals.
    In addition, section 1886(d)(13) of the Act, as added by section 
505 of Public Law 108-173, provides for an increase in the wage 
index for hospitals located in certain counties that have a 
relatively high percentage of hospital employees who reside in the 
county, but work in a different area with a higher wage index. 
Hospitals located in counties that qualify for the payment 
adjustment are to receive an increase in the wage index that is 
equal to a weighted average of the difference between the wage index 
of the resident county, post-reclassification and the higher wage 
index work area(s), weighted by the overall percentage of workers 
who are employed in an area with a higher wage index. There are an 
estimated 325 providers that would receive the out-migration wage 
adjustment in FY 2016. Rural hospitals generally qualify for the 
adjustment, resulting in a 0.1 percent increase in payments. This 
provision appears to benefit Section 401 hospitals and RRCs in that 
they would experience a 1.4 percent and 0.5 percent increase in 
payments, respectively. This out-migration wage adjustment also is 
not budget neutral, and we estimate the impact of these providers 
receiving the out-migration increase would be approximately $39 
million.

[[Page 24665]]

h. Effects of All Proposed FY 2016 Changes (Column 9)

    Column 9 shows our estimate of the proposed changes in payments 
per discharge from FY 2015 and FY 2016, resulting from all proposed 
changes reflected in this proposed rule for FY 2016. It includes 
combined effects of the previous columns in the table.
    The proposed average increase in payments under the IPPS for all 
hospitals is approximately 0.3 percent for FY 2016 relative to FY 
2015. As discussed in section II.D. of the preamble of this proposed 
rule, this column includes the proposed FY 2016 documentation and 
coding recoupment adjustment of -0.8 percent on the national 
standardized amount as part of the recoupment required under section 
631 of the ATRA. In addition, this column includes the proposed 
annual hospital update of 1.9 percent to the national standardized 
amount. This proposed annual hospital update includes the 2.7 
percent market basket update, the proposed reduction of 0.6 
percentage point for the multifactor productivity adjustment, and 
the 0.2 percentage point reduction under section 3401 of the 
Affordable Care Act. Hospitals paid under the hospital-specific rate 
would receive a 1.9 percent hospital update described above. As 
described in Column 2, the proposed annual hospital update with the 
proposed documentation and coding recoupment adjustment for 
hospitals paid under the national standardized amount combined with 
the proposed annual hospital update for hospitals paid under the 
hospital-specific rate would result in a 1.1 percent increase in 
payments in FY 2016 relative to FY 2015. The impact of moving from 
our estimate of FY 2015 outlier payments, 4.9 percent, to the 
proposed estimate of FY 2016 outlier payments, 5.1 percent, would 
result in an increase of 0.2 percent in FY 2016 payments relative to 
FY 2015. There also might be interactive effects among the various 
factors comprising the payment system that we are not able to 
isolate. For these reasons, the proposed values in Column 9 may not 
equal the sum of the proposed estimated percentage changes described 
above.
    Overall payments to hospitals paid under the IPPS due to the 
applicable percentage increase and changes to policies related to 
MS-DRGs, geographic adjustments, and outliers are estimated to 
increase by 0.3 percent for FY 2016. Hospitals in urban areas would 
experience a 0.3 percent increase in payments per discharge in FY 
2016 compared to FY 2015. Hospital payments per discharge in rural 
areas are estimated to decrease by 0.3 percent in FY 2016.

3. Impact Analysis of Table II

    Table II presents the projected impact of the proposed changes 
for FY 2016 for urban and rural hospitals and for the different 
categories of hospitals shown in Table I. It compares the estimated 
average payments per discharge for FY 2015 with the proposed 
estimated average payments per discharge for FY 2016, as calculated 
under our models. Therefore, this table presents, in terms of the 
average dollar amounts paid per discharge, the combined effects of 
the proposed changes presented in Table I. The proposed estimated 
percentage changes shown in the last column of Table II equal the 
proposed estimated percentage changes in average payments per 
discharge from Column 9 of Table I.

   Table II--Impact Analysis of Proposed Changes for FY 2016 Acute Care Hospital Operating Prospective Payment
                                                     System
                                            [Payments per discharge]
----------------------------------------------------------------------------------------------------------------
                                                                Estimated         Estimated
                                              Number of      average FY 2015   average FY 2016  Proposed FY 2016
                                              hospitals        payment per       payment per         changes
                                                                discharge         discharge
                                                       (1)               (2)               (3)               (4)
----------------------------------------------------------------------------------------------------------------
All Hospitals...........................             3,366            11,336            11,366               0.3
By Geographic Location:
    Urban hospitals.....................             2,530            11,690            11,727               0.3
    Large urban areas...................             1,390            12,444            12,480               0.3
    Other urban areas...................             1,140            10,777            10,813               0.3
    Rural hospitals.....................               836             8,398             8,377              -0.3
Bed Size (Urban):
    0-99 beds...........................               666             9,223             9,225                 0
    100-199 beds........................               777             9,866             9,896               0.3
    200-299 beds........................               446            10,616            10,661               0.4
    300-499 beds........................               428            11,934            11,976               0.4
    500 or more beds....................               213            14,306            14,342               0.3
Bed Size (Rural):
    0-49 beds...........................               329             6,996             6,927                -1
    50-99 beds..........................               298             7,914             7,844              -0.9
    100-149 beds........................               121             8,286             8,311               0.3
    150-199 beds........................                48             9,104             9,135               0.3
    200 or more beds....................                40            10,004            10,017               0.1
Urban by Region:
    New England.........................               120            12,840            12,848               0.1
    Middle Atlantic.....................               318            13,135            13,212               0.6
    South Atlantic......................               407            10,396            10,424               0.3
    East North Central..................               396            10,960            10,997               0.3
    East South Central..................               150            10,003             9,973              -0.3
    West North Central..................               165            11,472            11,522               0.4
    West South Central..................               382            10,612            10,583              -0.3
    Mountain............................               161            12,047            12,089               0.4
    Pacific.............................               380            14,921            15,038               0.8
    Puerto Rico.........................                51             7,666             7,448              -2.8
Rural by Region:
    New England.........................                22            11,325            11,195              -1.2
    Middle Atlantic.....................                55             8,473             8,422              -0.6
    South Atlantic......................               128             7,839             7,841                 0
    East North Central..................               116             8,731             8,744               0.1
    East South Central..................               164             7,522             7,433              -1.2
    West North Central..................               101             9,275             9,339               0.7

[[Page 24666]]

 
    West South Central..................               165             7,196             7,115              -1.1
    Mountain............................                61             9,731             9,815               0.9
    Pacific.............................                24            11,521            11,634                 1
By Payment Classification:
    Urban hospitals.....................             2,479            11,718            11,757               0.3
    Large urban areas...................             1,383            12,450            12,487               0.3
    Other urban areas...................             1,096            10,804            10,845               0.4
    Rural areas.........................               887             8,565             8,539              -0.3
Teaching Status:
    Nonteaching.........................             2,325             9,451             9,471               0.2
    Fewer than 100 residents............               794            11,012            11,047               0.3
    100 or more residents...............               247            16,464            16,513               0.3
Urban DSH:
    Non-DSH.............................               680            10,091            10,195                 1
    100 or more beds....................             1,572            12,096            12,121               0.2
    Less than 100 beds..................               333             8,643             8,656               0.2
Rural DSH:
    SCH.................................               253             8,611             8,677               0.8
    RRC.................................               220             9,267             9,277               0.1
    100 or more beds....................                33             7,695             7,580              -1.5
    Less than 100 beds..................               275             6,640             6,459              -2.7
Urban teaching and DSH:
    Both teaching and DSH...............               846            13,227            13,257               0.2
    Teaching and no DSH.................               132            11,441            11,580               1.2
    No teaching and DSH.................             1,059             9,897             9,913               0.2
    No teaching and no DSH..............               442             9,448             9,555               1.1
Special Hospital Types:
    RRC.................................               211             9,459             9,405              -0.6
    SCH.................................               327             9,962            10,065                 1
    SCH and RRC.........................               125            10,597            10,719               1.2
Type of Ownership:
    Voluntary...........................             1,934            11,504            11,550               0.4
    Proprietary.........................               880            10,007             9,996              -0.1
    Government..........................               529            12,252            12,248                 0
Medicare Utilization as a Percent of
 Inpatient Days:
    0-25................................               713            13,536            13,454              -0.6
    25-50...............................             2,110            11,258            11,304               0.4
    50-65...............................               332             9,423             9,470               0.5
    Over 65.............................                66             9,484             9,541               0.6
FY 2016 Reclassifications by the
 Medicare Geographic Classification
 Review Board:
    All Reclassified Hospitals..........               861            11,360            11,431               0.6
    Non-Reclassified Hospitals..........             2,505            11,325            11,338               0.1
    Urban Hospitals Reclassified........               585            11,961            12,048               0.7
    Urban Nonreclassified Hospitals.....             1,894            11,624            11,644               0.2
    All Rural Hospitals Reclassified....               276             8,861             8,869               0.1
    Rural Nonreclassified Hospitals.....               505             7,846             7,790              -0.7
    All Section 401 Reclassified                        58             9,792             9,722              -0.7
     Hospitals..........................
    Other Reclassified Hospitals                        55             7,786             7,731              -0.7
     (Section 1886(d)(8)(B))............
Specialty Hospitals:
    Cardiac Specialty Hospitals.........                14            12,652            12,780                 1
----------------------------------------------------------------------------------------------------------------

H. Effects of Other Proposed Policy Changes

    In addition to those proposed policy changes discussed above 
that we are able to model using our IPPS payment simulation model, 
we are proposing to make various other changes in this proposed 
rule. Generally, we have limited or no specific data available with 
which to estimate the impacts of these proposed changes. Our 
estimates of the likely impacts associated with these other proposed 
changes are discussed below.

1. Effects of Proposed Policy on MS-DRGs for Preventable HACs, 
Including Infections

    In section II.F. of the preamble of this proposed rule, we 
discuss our implementation of section 1886(d)(4)(D) of the Act, 
which requires the Secretary to identify conditions that are: (1) 
High cost, high volume, or both; (2) result in the assignment of a 
case to an MS-DRG that has a higher payment when present as a 
secondary diagnosis; and (3) could reasonably have been prevented 
through application of evidence-based guidelines. For discharges 
occurring on or after October 1, 2008, hospitals will not receive 
additional payment for cases in which one of the

[[Page 24667]]

selected conditions was not present on admission, unless, based on 
data and clinical judgment, it cannot be determined at the time of 
admission whether a condition is present. That is, the case will be 
paid as though the secondary diagnosis were not present. However, 
the statute also requires the Secretary to continue counting the 
condition as a secondary diagnosis that results in a higher IPPS 
payment when doing the budget neutrality calculations for MS-DRG 
reclassifications and recalibration. Therefore, we will perform our 
budget neutrality calculations as though the payment provision did 
not apply, but Medicare will make a lower payment to the hospital 
for the specific case that includes the secondary diagnosis. Thus, 
the provision results in cost savings to the Medicare program.
    We note that the provision will only apply when one or more of 
the selected conditions are the only secondary diagnosis or 
diagnoses present on the claim that will lead to higher payment. 
Medicare beneficiaries will generally have multiple secondary 
diagnoses during a hospital stay, such that beneficiaries having one 
MCC or CC will frequently have additional conditions that also will 
generate higher payment. Only a small percentage of the cases will 
have only one secondary diagnosis that would lead to a higher 
payment. Therefore, if at least one nonselected secondary diagnosis 
that leads to higher payment is on the claim, the case will continue 
to be assigned to the higher paying MS-DRG and there will be no 
Medicare savings from that case. In addition, as discussed in 
section II.F.3. of the preamble of this proposed rule, it is 
possible to have two severity levels where the HAC does not affect 
the MS-DRG assignment or for an MS-DRG not to have severity levels. 
In either of these circumstances, the case will continue to be 
assigned to the higher paying MS-DRG and there will be no Medicare 
savings from that case.
    As discussed in section II.F. of the preamble of this proposed 
rule, for FY 2016, we are not proposing to add or remove any 
categories of HACs for FY 2016.
    The HAC payment provision went into effect on October 1, 2008. 
Our savings estimates for the next 5 fiscal years are shown below:

------------------------------------------------------------------------
                                                            Savings (in
                          Year                               millions)
------------------------------------------------------------------------
FY 2016.................................................             $28
FY 2017.................................................              29
FY 2018.................................................              31
FY 2019.................................................              32
FY 2020.................................................              34
------------------------------------------------------------------------

2. Effects of Proposed Policy Relating to New Medical Service and 
Technology Add-On Payments

    In section II.I. of the preamble to this proposed rule, we 
discuss the nine technologies for which we received applications for 
add-on payments for new medical services and technologies for FY 
2016, as well as the status of the new technologies that were 
approved to receive new technology add-on payments in FY 2015. As 
explained in the preamble to this proposed rule, add-on payments for 
new medical services and technologies under section 1886(d)(5)(K) of 
the Act are not required to be budget neutral. As discussed in 
section II.I.5. of the preamble of this proposed rule, we have not 
yet determined whether any of the nine technologies for which we 
received applications for consideration for new technology add-on 
payments for FY 2016 will meet the specified criteria. Consequently, 
it is premature to estimate the potential payment impact of these 
nine technologies for any potential new technology add-on payments 
for FY 2016. We note that if any of the nine technologies are found 
to be eligible for new technology add-on payments for FY 2016, in 
the FY 2016 IPPS/LTCH PPS final rule, we would discuss the estimated 
payment impact for FY 2016.
    In section II.I.4. of the preamble of this proposed rule, we are 
proposing to discontinue new technology add-on payments for 
Voraxaze[supreg], the Zenith[supreg] F.Graft, and the Zilver[supreg] 
PTX[supreg] Drug Eluting Peripheral Stent for FY 2016 because these 
technologies will have been on the U.S. market for 3 years. We also 
are proposing to continue making new technology add-on payments for 
KcentraTM, the Argus[supreg] II Retinal Prosthesis 
System, the CardioMEMSTM HF Monitoring System, the 
MitraClip[supreg] System, and the RNS[supreg] System in FY 2016 
because these technologies are still considered new. We note that 
new technology add-on payments per case are limited to the lesser of 
(1) 50 percent of the costs of the new technology or (2) 50 percent 
of the amount by which the costs of the case exceed the standard MS-
DRG payment for the case. Because it is difficult to predict the 
actual new technology add-on payment for each case, our estimates 
below are based on the increase in add-on payments for FY 2016 as if 
every claim that would qualify for a new technology add-on payment 
would receive the maximum add-on payment. For KcentraTM, 
based on the applicant's estimate from FY 2014, we currently 
estimate that new technology add-on payments for 
KcentraTM will increase overall FY 2016 payments by 
$5,449,888. For the Argus[supreg] II Retinal Prosthesis System, 
based on the applicant's estimate from FY 2014, we currently 
estimate that new technology add-on payments for the Argus[supreg] 
II Retinal Prosthesis System will increase overall FY 2016 payments 
by $3,601,437. For the CardioMEMSTM HF Monitoring System, 
based on the applicant's estimate from FY 2015, we currently 
estimate that new technology add-on payments for the 
CardioMEMSTM HF Monitoring System will increase overall 
FY 2016 payments by $11,315,625. For the MitraClip[supreg] System, 
based on the applicant's estimate from FY 2015, we currently 
estimate that new technology add-on payments for the 
MitraClip[supreg] System will increase overall FY 2016 payments by 
$27,000,000. For the RNS[supreg] System, based on the applicant's 
estimate from FY 2015, we currently estimate that new technology 
add-on payments for the RNS[supreg] System will increase overall FY 
2016 payments by $12,932,500.

3. Effects of the Proposed Changes to Medicare DSH Payments for FY 2016

    As discussed in section IV.D. of the preamble of this proposed 
rule, under section 3133 of the Affordable Care Act, hospitals that 
are eligible to receive Medicare DSH payments will receive 25 
percent of the amount they previously would have received under the 
former statutory formula for Medicare DSH payments. The remainder, 
equal to an estimate of 75 percent of what otherwise formerly would 
have been paid as Medicare DSH payments that is reduced to reflect 
changes in the percentage of individuals under age 65 who are 
uninsured and additional statutory adjustments, is available to make 
additional payments to each hospital that qualifies for Medicare DSH 
payments. Each Medicare DSH hospital will receive an additional 
payment based on its estimated share of the total amount of 
uncompensated care for all Medicare DSH hospitals. The uncompensated 
care payment methodology has redistributive effects based on the 
proportion of a Medicare DSH's low-income insured patient days (sum 
of Medicaid patient days and Medicare SSI patient days) relative to 
the low-income insured patient days for all Medicare DSH hospitals 
(that is, Factor 3). The reduction to Medicare DSH payments due to 
the uncompensated care payment methodology is not budget neutral.
    In this FY 2016 IPPS/LTCH PPS proposed rule, the amount to be 
distributed as uncompensated care payments to DSH eligible hospitals 
is 75 percent of what otherwise would have been paid for Medicare 
DSH payment adjustments adjusted by a proposed Factor 2 of 63.69 
percent; for FY 2015, the uncompensated care payment was 75 percent 
of what otherwise would have been paid for Medicare DSH payment 
adjustments adjusted by a Factor 2 of 76.19 percent. In addition, 
for FY 2016, we are proposing to use data from the more recent of 
hospitals' full year 2012 or full year 2011 cost reports from the 
March 2015 update of the HCRIS database, 2012 cost report data 
submitted to CMS by IHS hospitals, and the most recent data (which 
we anticipate to be 2013 data at the time we are developing the 
final rule) on SSI ratios to calculate Factor 3. That is, we are 
proposing to hold constant the 2012 and 2011 cost report years used 
to obtain Medicaid days in the FY 2015 IPPS/LTCH PPS final rule but 
to use updated cost report data from a later extract of the HCRIS, 
to continue to use the 2012 cost report data submitted to CMS by IHS 
hospitals, and to use the most recent SSI ratios to calculate Factor 
3 for FY 2016.
    To estimate the impact of the combined effect of proposed 
changes to reductions in the uninsured and additional statutory 
adjustments (Factor 2) and Medicaid patient days (a component of 
Factor 3) on the calculation of Medicare DSH payments, we compared 
DSH payments estimated in the FY 2015 IPPS/LTCH PPS final rule to 
proposed DSH payments based on proposals in this FY 2016 IPPS/LTCH 
PPS proposed rule.
    For FY 2015, for each hospital, we calculated the sum of (a) 25 
percent of the estimated amount of what would have been paid as 
Medicare DSH in FY 2015 in the

[[Page 24668]]

absence of section 3133 of the Affordable Care Act and (b) 75 
percent of the estimated amount of what would have been paid as 
Medicare DSH payments in the absence of section 3133, adjusted by a 
Factor 2 of 76.19 percent and multiplied by Factor 3 as stated in 
the FY 2015 IPPS/LTCH PPS final rule and correction notice.
    For FY 2016, we calculated the sum of (a) 25 percent of the 
estimated amount of what would be paid as Medicare DSH payments in 
FY 2016 absent section 3133 and (b) 75 percent of the estimated 
amount of what would have been paid as Medicare DSH payments absent 
section 3133, adjusted by a Factor 2 of 63.69 percent, as proposed, 
and multiplied by a Factor 3 calculated using the more recent of the 
hospitals' full year 2012 or full year 2011 cost report from the 
December 2014 update of the HCRIS database, 2012 cost report data 
submitted to CMS by IHS hospitals, and 2012 SSI ratios. We note that 
we used the most recent data available to estimate Factor 3 for FY 
2016, as some of the data sources to be used under our proposed 
changes are not yet available.
    Our analysis included 2,234 hospitals projected to receive 
Medicare DSH payments in FY 2016 and did not include hospitals in 
the Rural Community Hospital Demonstration, hospitals that departed 
the Medicare program as of December 31, 2014, Maryland hospitals, 
SCHs that are expected to be paid based on their hospital-specific 
rates, and hospitals that are not included in 2010 MedPAR file (for 
example, new hospitals). In addition, low-income insured days from 
merged or acquired hospitals were combined into the surviving 
hospital's CCN, and the nonsurviving CCN was excluded from the 
analysis. The estimated impact of these proposed changes across a 
consistent universe of estimated FY 2016 DSHs, by hospital 
characteristic, is presented in the table below.

 Modeled Disproportionate Share Payment for Estimated FY 2016 DSH Hospitals by Hospital Type: Model DSH Dollars
                                                  [in millions]
----------------------------------------------------------------------------------------------------------------
                                              Number of
                                            estimated FY      FY 2015 final     FY 2016  NPRM      Percentage
                                              2016 DSH       rule estimated   estimated  DSH $       change
                                              Hospitals          DSH $ *              *
                                                       (0)               (1)               (2)               (4)
----------------------------------------------------------------------------------------------------------------
Total...................................             2,234           $10,993            $9,738             -11.4
By Geographic Location:
    Urban Hospitals.....................             1,745            10,443             9,253             -11.4
        Large Urban Areas...............               921             6,595             5,838             -11.5
        Other Urban Areas...............               824             3,848             3,415             -11.3
    Rural Hospitals.....................               488               549               485             -11.7
    Unknown.............................                 1                 1                 0             -15.0
Bed Size (Urban):
    0 to 99 Beds........................               261               165               143             -12.9
    100 to 249 Beds.....................               776             2,443             2,160             -11.6
    250 to 499 Beds.....................               507             4,104             3,642             -11.3
    500+ Beds...........................               201             3,732             3,307             -11.4
Bed Size (Rural):
    0 to 99 Beds........................               352               220               192             -13.1
    100 to 249 Beds.....................               123               263               234             -10.9
    250 to 499 Beds.....................                12                65                58             -10.1
    500+ Beds...........................                 1                 1                 1             -10.9
Urban by Region:
    East North Central..................               288             1,412             1,249             -11.5
    East South Central..................               125               664               590             -11.2
    Middle Atlantic.....................               211             1,845             1,640             -11.1
    Mountain............................               104               491               431             -12.3
    New England.........................                80               431               386             -10.5
    Pacific.............................               284             1,733             1,555             -10.3
    Puerto Rico.........................                31                78                65             -17.3
    South Atlantic......................               291             1,944             1,708             -12.1
    West North Central..................                95               484               426             -11.9
    West South Central..................               236             1,360             1,204             -11.5
Rural by Region:
    East North Central..................                59                50                44             -12.3
    East South Central..................               145               185               164             -11.6
    Middle Atlantic.....................                26                35                31             -12.8
    Mountain............................                21                15                13             -13.5
    New England.........................                 9                16                14             -10.9
    Pacific.............................                 8                10                10              -7.7
    South Atlantic......................                83               117               104             -11.1
    West North Central..................                29                22                19             -13.3
    West South Central..................               108                98                87             -11.5
By Payment Classification:
    Urban Hospitals.....................             1,756            10,437             9,247             -11.4
        Large Urban Areas...............               935             6,605             5,847             -11.5
        Other Urban Areas...............               821             3,832             3,400             -11.3
    Rural Hospitals.....................               477               555               491             -11.6
    Unknown.............................                 1                 1                 0             -15.0
Teaching Status:
    Nonteaching.........................             1,397             3,394             2,993             -11.8
    Fewer than 100 residents............               601             3,660             3,249             -11.2
    100 or more residents...............               235             3,939             3,496             -11.2
    Unknown.............................                 1                 1                 0             -15.0

[[Page 24669]]

 
Type of Ownership:
    Voluntary...........................             1,344             7,161             6,353             -11.3
    Proprietary.........................               448             1,616             1,426             -11.7
    Government..........................               442             2,216             1,959             -11.6
Medicare Utilization Percent:
    0-25................................               381             2,828             2,485             -12.1
    25-50...............................             1,460             7,405             6,579             -11.2
    50-65...............................               331               686               608             -11.3
    Over 65.............................                61                73                65             -10.9
    Unknown.............................                 1                 1                 0             -15.0
----------------------------------------------------------------------------------------------------------------
Source: Dobson [bond] DaVanzo analysis of 2011-2012 Hospital Cost Reports, 2010 MedPAR, and FY2015 Final Rule
  IPPS Impact File.
* Estimated DSH dollars calculated by [0.25 * estimated section 1886(d)(5)(F) payments] + [0.75 * estimated
  section 1886(d)(5)(F) payments * Factor 2 * Factor 3]. When summed across all hospitals projected to receive
  DSH payments, the Model DSH is $9,378 million in 2016 and $10,993 million in 2015. For the FY 2015 IPPS/LTCH
  PPS final rule, Factor 2 is equal to 76.19 percent. The proposed Factor 2 for FY 2016 is 63.69 percent.
** Percent change is determined as the difference between Medicare DSH payments modeled for the FY 2016 IPPS/
  LTCH PPS proposed rule (column 2) and Medicare DSH payments modeled for the FY 2015 IPPS/LTCH PPS final rule
  (column 1) divided by Medicare DSH payments modeled for the FY 2015 final rule (column 1) times 100 percent .

    The impact analysis found that changes from the FY 2015 IPPS/
LTCH PPS final rule were primarily driven by two components: (1) A 
reduction in the percentage of individuals who are uninsured, from 
13.75 percent in the FY 2015 IPPS/LTCH PPS final rule to 11.5 
percent in this FY 2016 proposed rule; and (2) changes in the number 
of Medicaid days for 2012 (or 2011) obtained from each hospitals' 
March 2014 HCRIS update of their Medicare cost report (used in the 
FY 2015 IPPS/LTCH PPS final rule) to the Medicaid days reported in 
the December 2014 HCRIS update (used in this FY 2016 proposed rule). 
The change in the percentage of individuals who are uninsured is a 
national estimate affecting all hospitals equally, while the change 
in Medicaid days is hospital-specific. For purposes of this proposed 
rule, the SSI ratios used in this analysis are the same 2012 SSI 
ratios used in the FY 2015 IPPS/LTCH PPS final rule and correction 
notice because the 2013 ratios are not yet available.
    The impact analysis table above shows that across all projected 
disproportionate share hospitals, FY 2016 DSH payments, including 
both empirically justified DSH payments and uncompensated care 
payments, are estimated at approximately $9.738 billion, or a 
decrease of 11.4 percent from FY 2015 DSH payments ($10.993 
billion). This is solely the result of a proposed reduction in 
Factor 2. As a result, we project that proposed payments for FY 2016 
to hospitals paid under the IPPS would be reduced overall by 1.0 
percent as compared to overall payments to hospitals paid under the 
IPPS in FY 2015.
    Differences in the percent reduction in DSH payments were 
relatively small across most hospital categories because the overall 
average percent change in Medicaid days was relatively small 
compared to the overall percent reduction in the estimate of the 
percentage of individuals who are uninsured. Variation in the 
reductions in DSH payments were influenced by the change in the 
number of Medicaid days (the number of Medicaid days increased by 
0.453 percent for all included hospitals from the FY 2015 IPPS/LTCH 
PPS final rule to this FY 2016 IPPS/LTCH PPS proposed rule) and each 
hospital characteristic group's relative proportion of Medicaid to 
SSI days. We note that SSI days used in this analysis have not 
changed since the FY 2015 IPPS/LTCH PPS final rule; however, we 
anticipate using 2013 SSI days for the FY 2016 IPPS/LTCH PPS final 
rule. Rural hospitals are expected to experience a slightly larger 
decrease compared to urban hospitals, as defined by geographic 
location or payment classification. Among rural and urban hospitals, 
small hospitals (0 to 99 beds) are expected to receive greater 
reductions in DSH payments compared to their larger counterparts, 
respectively. By region, urban hospitals located in Puerto Rico are 
expected to receive disproportionately larger reductions in DSH 
payments, while Pacific urban hospitals are expected to receive 
disproportionately smaller reductions in DSH payments. Rural 
hospitals located in the Mountain region also are projected to 
receive larger reductions in DSH payments, while rural hospitals in 
the Pacific region are projected to receive smaller reductions 
relative to the universe of projected FY 2016 DSHs. Although urban 
hospitals in Puerto Rico are projected to receive disproportionately 
larger reductions in DSH payments, they are still expected to 
receive more in Medicare DSH and uncompensated care payments under 
section 3133 than if they were paid the amount they previously would 
have received under the former statutory formula for Medicare DSH 
payments. Nonteaching hospitals are projected to receive a larger 
reduction in DSH payments than both small and large teaching 
hospitals. Government hospitals are projected to receive larger 
reductions in DSH payments than not-for-profit hospitals, but 
smaller reductions compared to for-profit hospitals. In addition, 
hospitals with higher Medicare utilization are projected to receive 
smaller reductions in DSH payments relative to hospitals with lower 
Medicare utilization.

4. Effects of Proposed Reduction Under the Hospital Readmissions 
Reduction Program

    In section IV.E. of the preamble of this proposed rule, we 
discuss our proposals for FY 2016 for the Hospital Readmissions 
Reduction Program (established under section 3025 of the Affordable 
Care Act), which requires a reduction to a hospital's base operating 
DRG payments to account for excess readmissions. For FY 2016, the 
reduction is based on a hospital's risk-adjusted readmission rate 
during a 3-year period for five applicable conditions: Acute 
myocardial infarction, heart failure, pneumonia, total hip and total 
knee arthroplasty and chronic obstructive pulmonary disease. This 
provision is not budget neutral. A hospital's readmission adjustment 
is the higher of a ratio of the hospital's aggregate payments for 
excess readmissions to their aggregate payments for all discharges, 
or a floor, which has been defined in the statute as 0.97 (or a 3.0 
percent reduction). A hospital's base operating DRG payment (that 
is, wage-adjusted DRG payment amount, as discussed in section IV.E. 
of the preamble of this proposed rule) is the portion of the IPPS 
payment subject to the readmissions payment adjustment (DSH, IME, 
outliers and low-volume add-on payments are not subject to the 
readmissions adjustment). In this proposed rule, we estimate that 
2,655 hospitals will have their base operating DRG payments reduced 
by their proxy FY 2016 hospital-specific readmissions adjustment. As 
a result, we estimate that the Hospital Readmissions

[[Page 24670]]

Reduction Program would result in no material change in payments 
relative to FY 2015.

5. Effects of Proposed Changes Under the FY 2016 Hospital Value-Based 
Purchasing (VBP) Program

    In section IV.F. of the preamble of this proposed rule, we 
discuss the Hospital VBP Program under which the Secretary makes 
value-based incentive payments to hospitals based on their 
performance on measures during the performance period with respect 
to a fiscal year. These incentive payments will be funded for FY 
2016 through a reduction to the FY 2016 base operating DRG payment 
for each discharge of 1.75 percent, as required by section 
1886(o)(7)(B) of the Act. The applicable percentage for FY 2017 and 
subsequent years is 2 percent. The total amount available for value-
based incentive payments must be equal to the total amount of 
reduced payments for all hospitals for the fiscal year, as estimated 
by the Secretary.
    We estimate the available pool of funds for value-based 
incentive payments in the FY 2016 program year, which, in accordance 
with section 1886(o)(7)(C)(iv) of the Act, will be 1.75 percent of 
base operating DRG payments, or a total of approximately $1.49 
billion. This estimated available pool for FY 2016 is based on the 
historical pool of hospitals that were eligible to participate in 
the FY 2015 program year and the payment information from the 
December 2014 update to the FY 2014 MedPAR file.
    The proposed estimated impacts of the FY 2016 program year by 
hospital characteristic, found in the table below, are based on 
historical TPSs. We used the FY 2015 program year's TPSs to 
calculate the proxy adjustment factors used for this impact 
analysis. These are the most recently available scores that 
hospitals were given an opportunity to review and correct. The proxy 
adjustment factors use estimated annual base operating DRG payment 
amounts derived from the December 2014 update to the FY 2014 MedPAR 
file. The proxy adjustment factors can be found in Table 16 
associated with this proposed rule (available via the Internet on 
the CMS Web site).
    The impact analysis shows that, for the FY 2016 program year, 
the number of hospitals that would receive an increase in base 
operating DRG payment amount is slightly higher than the number of 
hospitals that would receive a decrease. Among urban hospitals, 
those in the New England, South Atlantic, East North Central, East 
South Central, West North Central, West South Central, Mountain, and 
Pacific regions would have an increase, on average, in the base 
operating DRG payment amount. Urban hospitals in the Middle Atlantic 
region would receive an average decrease in the base operating 
payment amount. Among rural hospitals, those in all regions would 
have an increase, on average, in base operating DRG payment amounts.
    On average, hospitals that receive a higher percent of DSH 
payments would receive decreases in the base operating DRG payment 
amount. With respect to hospitals' Medicare utilization (MCR), those 
hospitals with an MCR above 65 percent would have the largest 
increase, on average, in base operating DRG payment amounts.
    Nonteaching hospitals would have an average increase, and 
teaching hospitals would experience an average decrease, in the base 
operating DRG payment amount.

  Impact Analysis of Base Operating DRG Payment Amount Proposed Changes
             Resulting From the FY 2016 Hospital VBP Program
------------------------------------------------------------------------
                                                              Average
                                             Number of      percentage
                                             hospitals        change
------------------------------------------------------------------------
By Geographic Location:
    All Hospitals.......................           3,089           0.133
        Large Urban.....................           1,262           0.046
        Other Urban.....................           1,066           0.137
        Rural Area......................             760           0.269
        Missing *.......................               1           1.009
    Urban hospitals.....................           2,328           0.088
        0-99 beds.......................             515           0.506
        100-199 beds....................             735           0.025
        200-299 beds....................             445          -0.055
        300-499 beds....................             423          -0.075
        500 or more beds................             210          -0.088
    Rural hospitals.....................             760           0.269
        0-49 beds.......................             251           0.453
        50-99 beds......................             299           0.250
        100-149 beds....................             123           0.075
        150-199 beds....................              49           0.044
        200 or more beds................              38           0.126
By Region:
    Urban By Region.....................           2,328           0.088
        New England.....................             116           0.045
        Middle Atlantic.................             306          -0.057
        South Atlantic..................             389           0.038
        East North Central..............             376           0.106
        East South Central..............             139           0.042
        West North Central..............             154           0.366
        West South Central..............             332           0.178
        Mountain........................             157           0.048
        Pacific.........................             359           0.093
    Rural By Region.....................             760           0.269
        New England.....................              20           0.384
        Middle Atlantic.................              55           0.170
        South Atlantic..................             123           0.330
        East North Central..............             114           0.281
        East South Central..............             135           0.269
        West North Central..............              93           0.333
        West South Central..............             140           0.162
        Mountain........................              56           0.346
        Pacific.........................              24           0.228
By MCR Percent
    0-25................................             395           0.146

[[Page 24671]]

 
    25-50...............................           1,972           0.098
    50-65...............................             558           0.167
    Over 65.............................              93           0.305
    Missing.............................              70           0.506
By DSH Percent:
    0-25................................           1,477           0.248
    25-50...............................           1,329           0.061
    50-65...............................             138          -0.163
    Over 65.............................             144          -0.115
By Teaching Status:
    Non-Teaching........................           2,085           0.209
    Teaching............................           1,003          -0.028
------------------------------------------------------------------------

    Actual FY 2016 program year's TPSs will not be reviewed and 
corrected by hospitals until after the FY 2016 IPPS/LTCH PPS final 
rule has been published. Therefore, the same historical universe of 
eligible hospitals and corresponding TPSs from the FY 2015 program 
year will be used for the updated impact analysis in that final 
rule.

6. Effects of Proposed Changes to the HAC Reduction Program for FY 2016

    In section IV.G. of the preamble of this proposed rule, we 
discuss the proposed changes to the HAC Reduction Program for FY 
2016. We note that section 3008 of the Affordable Care Act added 
section 1886(p) to the Act to provide an incentive for certain 
hospitals to reduce the incidence of HACs. Section 1886(p) of the 
Act requires the Secretary to make an adjustment to payments to 
``applicable hospitals'' effective beginning on October 1, 2014 and 
for subsequent program years. We refer readers to section V.I.1.a. 
of the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through 50708) 
for a general overview of the HAC Reduction Program. For a further 
description of our policies for the HAC Reduction Program, we refer 
readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50707 through 
50729) and the FY 2015 IPPS/LTCH PPS final rule (79 FR 50087 through 
50104). These policies describe the general framework for 
implementation of the HAC Reduction Program including: (a) The 
relevant definitions applicable to the program; (b) the payment 
adjustment under the program; (c) the measure selection and 
conditions for the program, including a risk-adjustment and scoring 
methodology; (d) performance scoring; (e) the process for making 
hospital-specific performance information available to the public, 
including the opportunity for a hospital to review the information 
and submit corrections; and (f) limitation of administrative and 
judicial review. We are not proposing any changes to these policies 
for the implementation of the FY 2016 HAC Reduction Program.
    We note that hospitals received a payment reduction for the 
first time in FY 2015. The table and analysis that we are presenting 
below are a simulation of the proposed FY 2016 HAC Reduction Program 
using historical data. This table and analysis will be revised with 
updated available data in the FY 2016 IPPS/LTCH PPS final rule. We 
note that, as described earlier in this proposed rule, because 
scores will undergo 30-day review and correction by the hospitals 
that will not conclude until after the publication of the final 
rule, we will not provide hospital-level data or a hospital-level 
payment impact in conjunction with the FY 2016 IPPS/LTCH PPS 
proposed or final rule.
    For FY 2016, we note that we finalized a Total HAC Score 
methodology in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50087 
through 50104) that assigns weights for Domain 1 and Domain 2 at 25 
percent and 75 percent, respectively. The table below presents data 
on the estimated proportion of hospitals in the worst-performing 
quartile of the Total HAC Score by hospital characteristic, based on 
this methodology.
    To estimate the impact of the FY 2016 HAC Reduction Program, we 
used the following: the AHRQ Patient Safety Indicator (PSI) 90 
measure results based on Medicare FFS discharges from July 2012 
through June 2014 and version 4.5a of the AHRQ software. For CDC 
Central Line-Associated Bloodstream Infection (CLABSI), Catheter-
Associated Urinary Tract Infection (CAUTI), and Colon and Abdominal 
Hysterectomy Surgical Site Infection (SSI) measure results, the 
following was used: The standardized infection ratios (SIRs) 
calculated with hospital surveillance data reported to the National 
Healthcare Safety Network (NHSN) for infections occurring between 
January 2012 and December 2013. We used the FY 2015 Final Impact 
File to analyze the results by hospital characteristic.
    Of the 3,317 hospitals included in this analysis, 3,277 
hospitals had information for geographic location, region, bed size, 
DSH percent, and teaching status; 3,233 had information for 
ownership; and 3,159 had information for Medicare days as a percent 
of total inpatient days (MCR percent). These differences in the 
number of hospitals listed for each characteristic are due to the 
source of the hospital characteristic data. Maryland hospitals are 
not included in the identification of the worst-performing quartile 
for the HAC Reduction Program in FY 2016 and, therefore, are not 
represented in the table below.
    The third column in the table indicates the percent of hospitals 
in each category of the specified characteristic. For example, 
within geographic region, 40.6 percent of hospitals (or 1,329 
hospitals) are characterized as large urban, 33.9 percent of 
hospitals (or 1,110 hospitals) are characterized as other urban, and 
25.6 percent of hospitals (or 838 hospitals) are characterized as 
rural. The fifth column in the table indicates the proportion of 
hospitals for each characteristic that we estimate will be in the 
worst-performing quartile of Total HAC Scores and will receive a 
payment reduction under the FY 2016 HAC Reduction Program. For 
example, with regard to geographic location, we estimate 20.8 
percent of hospitals (or 277 hospitals) characterized as large urban 
would be subject to a payment reduction; 20.1 percent of hospitals 
(or 223 hospitals) characterized as other urban would be subject to 
a payment reduction; and 15.9 percent of hospitals (or 133 
hospitals) characterized as rural would be subject to a payment 
reduction.
    With regard to geographic location of urban hospitals by bed 
size, 17.4 percent of hospitals (or 108 hospitals) characterized as 
urban hospitals with bed size of 1-99 beds would be subject to a 
payment adjustment; 17.5 percent of hospitals (or 129 hospitals) 
characterized as urban hospitals with bed size of 100-199 beds would 
be subject to a payment adjustment; 19.1 percent of hospitals (or 85 
hospitals) characterized as urban hospitals with bed size of 200-299 
beds would be subject to a payment adjustment; 22.9 percent of 
hospitals (or 62 hospitals) characterized as urban hospitals with 
bed size of 300-399 beds would be subject to a payment adjustment; 
33.1 percent of hospitals (or 51 hospitals) characterized as urban 
hospitals with bed size of 400-499 beds would be subject to a 
payment adjustment; and 30.8 percent of hospitals (or 65 hospitals) 
characterized as urban hospitals with bed size of 500 or more beds 
would be subject to a payment adjustment.
    With regard to geographical location of rural hospitals by bed 
size, 19.6 percent of hospitals (or 64 hospitals) characterized as 
rural hospitals with bed size of 1-49 beds would be subject to a 
payment adjustment; 14.0 percent of hospitals (or 42 hospitals)

[[Page 24672]]

characterized as rural hospitals with bed size of 50-99 beds would 
be subject to a payment adjustment; 9.7 percent of hospitals (or 12 
hospitals) characterized as rural hospitals with bed size of 100-149 
beds would be subject to a payment adjustment; 8.2 percent of 
hospitals (or 4 hospitals) characterized as rural hospitals with bed 
size of 150-199 beds would be subject to a payment adjustment; and 
28.2 percent of hospitals (or 11 hospitals) characterized as rural 
hospitals with bed size of 200 or more beds would be subject to a 
payment adjustment.
    With regard to region of urban hospitals, 29.6 percent of 
hospitals (or 34 hospitals) characterized as urban in the New 
England region would be subject to a payment adjustment; 27.8 
percent of hospitals (or 88 hospitals) characterized as urban in the 
Mid-Atlantic region would be subject to a payment adjustment; 18.7 
percent of hospitals (or 75 hospitals) characterized as urban in the 
South Atlantic region would be subject to a payment adjustment; 17.0 
percent of hospitals (or 66 hospitals) characterized as urban in the 
East North Central region would be subject to a payment adjustment; 
15.5 percent of hospitals (or 23 hospitals) characterized as urban 
in the East South Central region would be subject to a payment 
adjustment; 19.9 percent of hospitals (or 32 hospitals) 
characterized as urban in the West North Central region would be 
subject to a payment adjustment; 15.4 percent of hospitals (or 57 
hospitals) characterized as urban in the West South Central region 
would be subject to a payment adjustment; 25.6 percent of hospitals 
(or 42 hospitals) characterized as urban in the Mountain region 
would be subject to a payment adjustment; and 22.2 percent of 
hospitals (or 83 hospitals) characterized as urban in the Pacific 
region would be subject to a payment adjustment.
    With regard to region of rural hospitals, 40.0 percent of 
hospitals (or 8 hospitals) characterized as rural in the New England 
region would be subject to a payment adjustment; 16.4 percent of 
hospitals (or 9 hospitals) characterized as rural in the Mid-
Atlantic region would be subject to a payment adjustment; 12.6 
percent of hospitals (or 16 hospitals) characterized as rural in the 
South Atlantic region would be subject to a payment adjustment; 14.9 
percent of hospitals (or 17 hospitals) characterized as rural in the 
East North Central region would be subject to a payment adjustment; 
8.9 percent of hospitals (or 14 hospitals) characterized as rural in 
the East South Central region would be subject to a payment 
adjustment; 23.1 percent of hospitals (or 24 hospitals) 
characterized as rural in the West North Central region would be 
subject to a payment adjustment; 16.5 percent of hospitals (or 27 
hospitals) characterized as rural in the West South Central region 
would be subject to a payment adjustment; 18.6 percent of hospitals 
(or 13 hospitals) characterized as rural in the Mountain region 
would be subject to a payment adjustment; and 19.2 percent of 
hospitals (or 5 hospital) characterized as rural in the Pacific 
region would be subject to a payment adjustment.
    With regard to the DSH percent characteristic, 18.2 percent of 
hospitals (or 289 hospitals) characterized in the 0-24 DSH percent 
would be subject to a payment adjustment; 18.8 percent of hospitals 
(or 258 hospitals) characterized in the 25-49 DSH percent would be 
subject to a payment adjustment; 26.8 percent of hospitals (or 41 
hospitals) characterized in the 50-64 DSH percent would be subject 
to a payment adjustment; and 27.4 percent of hospitals (or 45 
hospitals) characterized in the 65 and over DSH percent would be 
subject to a payment adjustment.
    With regard to the teaching status characteristic, 16.2 percent 
of hospitals (or 366 hospitals) characterized as nonteaching would 
be subject to a payment adjustment; 21.4 percent of hospitals (or 
165 hospitals) characterized as fewer than 100 residents would be 
subject to a payment adjustment; and 42.3 percent of hospitals (or 
102 hospitals) characterized as 100 or more residents would be 
subject to a payment adjustment.
    With regard to the urban teaching and DSH characteristic, 28.4 
percent of hospitals (or 235 hospitals) characterized as teaching 
and DSH would be subject to a payment adjustment; 18.9 percent of 
hospitals (or 24 hospitals) characterized as teaching and no DSH 
would be subject to a payment adjustment; 15.2 percent of hospitals 
(or 161 hospitals) characterized as no teaching and DSH would be 
subject to a payment adjustment; 18.7 percent of hospitals (or 80 
hospitals) characterized as no teaching and no DSH would be subject 
to a payment adjustment; and 15.9 percent of hospitals (or 133 
hospitals) characterized as nonurban would be subject to a payment 
adjustment.
    With regard to the type of ownership characteristic, 19.8 
percent of hospitals (or 371 hospitals) characterized as voluntary 
would be subject to a payment adjustment; 15.1 percent of hospitals 
(or 128 hospitals) characterized as proprietary would be subject to 
a payment adjustment; and 22.4 percent of hospitals (or 115 
hospitals) characterized as government would be subject to a payment 
adjustment.
    With regard to the MCR percent characteristic, 27.4 percent of 
hospitals (or 119 hospitals) characterized in the 0-24 MCR percent 
would be subject to a payment adjustment; 19.1 percent of hospitals 
(or 386 hospitals) characterized in the 25-49 MCR percent would be 
subject to a payment adjustment; 14.4 percent of hospitals (or 84 
hospitals) characterized in the 50-64 MCR percent would be subject 
to a payment adjustment; and 7.0 percent of hospitals (or 8 
hospitals) characterized in the 65 and over MCR percent would be 
subject to a payment adjustment.

Estimated Proportion of Hospitals in the Worst-Performing Quartile (>75th Percentile) of the Total HAC Score for
                                        the FY 2016 HAC Reduction Program
                                          [By hospital characteristic]
----------------------------------------------------------------------------------------------------------------
                                                                                     Number of      Percent of
                                                                                   hospitals in    hospitals in
             Hospital characteristic                 Number of      Percent \b\     the worst-      the worst-
                                                   hospitals \a\                    performing      performing
                                                                                     quartile      quartile \c\
----------------------------------------------------------------------------------------------------------------
Total \d\.......................................           3,317             100             644            19.4
By Geographic Location:
All hospitals:
    Large urban \e\.............................           1,329            40.6             277            20.8
    Other urban.................................           1,110            33.9             223            20.1
    Rural.......................................             838            25.6             133            15.9
Urban hospitals:
    1-99 beds...................................             620            25.4             108            17.4
    100-199 beds................................             738            30.3             129            17.5
    200-299 beds................................             445            18.2              85            19.1
    300-399 beds................................             271            11.1              62            22.9
    400-499.....................................             154             6.3              51            33.1
    500 or more beds............................             211             8.7              65            30.8
Rural hospitals:
    1-49 beds...................................             326            38.9              64            19.6
    50-99 beds..................................             300            35.8              42            14.0
    100-149 beds................................             124            14.8              12             9.7
    150-199 beds................................              49             5.8               4             8.2

[[Page 24673]]

 
    200 or more beds............................              39             4.7              11            28.2
By Region:
Urban by region:
    New England.................................             115             4.7              34            29.6
    Mid-Atlantic................................             316            13.0              88            27.8
    South Atlantic..............................             401            16.4              75            18.7
    East North Central..........................             389            15.9              66            17.0
    East South Central..........................             148             6.1              23            15.5
    West North Central..........................             161             6.6              32            19.9
    West South Central..........................             371            15.2              57            15.4
    Mountain....................................             164             6.7              42            25.6
    Pacific.....................................             374            15.3              83            22.2
Rural by region:
    New England.................................              20             2.4               8            40.0
    Mid-Atlantic................................              55             6.6               9            16.4
    South Atlantic..............................             127            15.2              16            12.6
    East North Central..........................             114            13.6              17            14.9
    East South Central..........................             158            18.9              14             8.9
    West North Central..........................             104            12.4              24            23.1
    West South Central..........................             164            19.6              27            16.5
    Mountain....................................              70             8.4              13            18.6
    Pacific.....................................              26             3.1               5            19.2
By DSH Percent \f\
    0-24........................................           1,584            48.3             289            18.2
    25-49.......................................           1,376            42.0             258            18.8
    50-64.......................................             153             4.7              41            26.8
    65 and over.................................             164             5.0              45            27.4
By Teaching Status: \g\
    Non-teaching................................           2,265            69.1             366            16.2
    Fewer than 100 residents....................             771            23.5             165            21.4
    100 or more residents.......................             241             7.4             102            42.3
By Urban Teaching and DSH f g
    Teaching and DSH............................             827            25.2             235            28.4
    Teaching and no DSH.........................             127             3.9              24            18.9
    No teaching and DSH.........................           1,058            32.3             161            15.2
    No teaching and no DSH......................             427            13.0              80            18.7
    Non-urban...................................             838            25.6             133            15.9
By Type of Ownership:
    Voluntary...................................           1,873            57.9             371            19.8
    Proprietary.................................             846            26.2             128            15.1
    Government..................................             514            15.9             115            22.4
By MCR Percent:
    0-24........................................             435            13.8             119            27.4
    25-49.......................................           2,026            64.1             386            19.1
    50-64.......................................             584            18.5              84            14.4
    65 and over.................................             114             3.6               8             7.0
----------------------------------------------------------------------------------------------------------------
Source: FY 2016 HAC Reduction Program Proposed Rule Results provided by R&A contract. Scores are based on AHRQ
  PSI 90 data from July 2012 through June 2014 and CLABSI, CAUTI, and SSI results from January 2012 to December
  2013. Hospital Characteristics are based on the FY 2015 Final Impact File last updated on September 30, 2014.
Notes:
\a\ The total number of hospitals with hospital characteristic data (3,277 for geographic location, bed size,
  and teaching status; 3,233 for type of ownership; and 3,159 for MCR) do not add up to the total number of
  hospitals we estimate would be eligible for the FY 2016 HAC Reduction Program (3,317) because 40 hospitals are
  not included in the FY 2015 Final Impact File and not all hospitals have data for all characteristics.
\b\ This column is the percent of all hospitals with each characteristic that we estimate would be eligible for
  the FY 2016 HAC Reduction Program and are included in the FY 2015 Final Impact File. Percentages may not sum
  to 100 due to rounding.
\c\ This column is the percent of hospitals within each characteristic that we estimate would be in the worst-
  performing quartile.
\d\ Total excludes the 46 Maryland hospitals.
\e\ Large urban hospitals are hospitals located in large urban areas with populations over 1 million.
\f\ A hospital is considered to be a DSH hospital if it has a DSH patient percentage greater than zero.
\g\ A hospital is considered to be a teaching hospital if it has an IME adjustment factor for Operation PPS
  (TCHOP) greater than zero.


[[Page 24674]]

7. Effects of Proposed Elimination of Simplified Cost Allocation 
Methodology Used by Hospitals

    In section IV.H. of the preamble of this proposed rule, we 
discuss our proposal to amend the regulations at 42 CFR 
412.302(d)(4) to limit a hospital's ability to elect the simplified 
cost allocation methodology under the terms and conditions provided 
in the instructions for CMS Form 2552 to cost reporting periods 
beginning before October 1, 2015. We are proposing to limit the 
election of the simplified cost allocation methodology because the 
allocation of the costs of capital-related movable equipment using 
this methodology yields less precise calculated CCRs. Furthermore, 
we believe that advances in technology have reduced the cost of 
recordkeeping, which has allowed hospitals to maintain accurate 
statistical data and afforded them the flexibility to change to a 
more precise allocation methodology. Although these proposed changes 
would impact some small rural hospitals, including CAHs, the vast 
majority of hospitals do not use the simplified cost allocation 
methodology. Based on FY 2013 data, only 9 of 1,269 CAHs and 23 of 
4,389 hospitals other than CAHs used the simplified cost allocation 
methodology. In addition, when the simplified cost allocation 
methodology was implemented in 1996, it was expected that it also 
would likely result in reduced Medicare payments to hospitals. We 
believe that the proposed changes would not have a significant 
impact on the operations of a substantial number of small rural 
hospitals. We also do not believe that the proposed changes would 
affect beneficiary access to care, as affected hospitals will 
continue to be paid for services provided to Medicare beneficiaries.
    We are inviting public comments on this analysis of impact.

8. Effects of Implementation of Rural Community Hospital Demonstration 
Program

    In section IV.I. of the preamble of this proposed rule, for FY 
2016, we discuss our implementation of section 410A of Public Law 
108-173, as amended, which requires the Secretary to conduct a 
demonstration that would modify reimbursement for inpatient services 
for up to 30 rural community hospitals. Section 410A(c)(2) requires 
that in conducting the demonstration program under this section, the 
Secretary shall ensure that the aggregate payments made by the 
Secretary do not exceed the amount which the Secretary would have 
paid if the demonstration program under this section was not 
implemented. As discussed in section IV.I. of the preamble of this 
proposed rule, in the IPPS final rules for each of the previous 11 
fiscal years, we have estimated the additional payments made by the 
program for each of the participating hospitals as a result of the 
demonstration. In order to achieve budget neutrality, we are 
proposing to adjust the national IPPS rates by an amount sufficient 
to account for the added costs of this demonstration. In other 
words, we are proposing to apply budget neutrality across the 
payment system as a whole rather than across the participants of 
this demonstration. The language of the statutory budget neutrality 
requirement permits the agency to implement the budget neutrality 
provision in this manner. The statutory language requires that 
aggregate payments made by the Secretary do not exceed the amount 
which the Secretary would have paid if the demonstration was not 
implemented but does not identify the range across which aggregate 
payments must be held equal.
    We are proposing to adjust the national IPPS rates according to 
the methodology set forth in section IV.I.2. of the preamble of this 
proposed rule. We note that the phase-out of the demonstration has 
begun with the 7 ``pre-expansion'' participating hospitals that were 
selected for the demonstration during 2004 and 2008 concluding their 
participation during FY 2015. Therefore, we are proposing that the 
financial experience of these hospitals not be included in the 
estimated demonstration cost for FY 2016. Of the 15 hospitals that 
were selected in 2011 as a result of the expansion of the 
demonstration under the Affordable Care Act, 11 hospitals are 
scheduled to end their participation in the demonstration during FY 
2016. Eight of these 11 hospitals are scheduled to end their 
participation in the demonstration prior to September 30, 2016. For 
each of these 8 hospitals, we are proposing to estimate the 
reasonable cost amount and the amount that would otherwise be paid 
without the demonstration for FY 2016 on a prorated basis, 
multiplying the estimated amounts for each hospital (as derived from 
``as submitted'' cost reports for cost reporting periods ending in 
CY 2013) by the fraction of the number of months that it will 
participate in the demonstration during FY 2016 in relation to the 
total 12-month period. Accordingly, the proposed budget neutrality 
offset amount used to determine the proposed adjustment to the 
national IPPS rates to account for estimated demonstration costs for 
FY 2016 for these 15 hospitals is $26,195,949. In addition, in this 
proposed rule, we are proposing to subtract from the budget 
neutrality offset amount for FY 2016 the amount by which the budget 
neutrality offset amount that was finalized in the FY 2009 IPPS/LTCH 
PPS final rule exceeds the actual costs of the demonstration for FY 
2009 (as shown in the finalized cost reports for cost reporting 
periods beginning in FY 2009) ($8,457,452). Therefore, the resulting 
total ($17,738,497) is the amount for which a proposed adjustment to 
the IPPS rates for FY 2016 would be calculated.

9. Effects of the Proposed Changes to MS-DRGs Subject to the Postacute 
Care Transfer Policy and the Special Payment Policy

    In section IV.J. of the preamble to this proposed rule, we 
discuss proposed changes to the list of MS-DRGs subject to the 
postacute care transfer policy and the DRG special payment policy. 
As reflected in Table 5 listed in section VI. of the Addendum to 
this proposed rule (which is available via the Internet on the CMS 
Web site), using criteria set forth in regulations at Sec.  412.4, 
we evaluated MS-DRG charge, discharge, and transfer data to 
determine which MS-DRGs qualify for the postacute care transfer and 
DRG special payment policies. We note that we are not proposing to 
make any changes in these payment policies in this FY 2016 proposed 
rule. We are proposing to include two proposed new MS-DRGs on the 
list of MS-DRGs subject to the postacute care transfer policy and 
the DRG special payment policy as a result of our proposals to 
revise the MS-DRG classifications for FY 2016. Specifically, we are 
proposing that two proposed new MS-DRGs would qualify for the 
postacute care transfer policy and the DRG special payment policy in 
FY 2016. Column 4 of Table I in this Appendix A shows the effects of 
the proposed changes to the MS-DRGs and the relative payment weights 
and the application of the recalibration budget neutrality factor to 
the standardized amounts. Section 1886(d)(4)(C)(i) of the Act 
requires us annually to make appropriate DRG classification changes 
in order to reflect changes in treatment patterns, technology, and 
any other factors that may change the relative use of hospital 
resources. The analysis and methods for determining the proposed 
changes due to the MS-DRGs and relative payment weights account for 
and include changes in the status of MS-DRG postacute care transfer 
and special payment policies. We refer readers to section I.G. of 
this Appendix A for a detailed discussion of payment impacts due to 
MS-DRG reclassification policies.

I. Effects of Proposed Changes in the Capital IPPS

1. General Considerations

    For the impact analysis presented below, we used data from the 
December 2014 update of the FY 2014 MedPAR file and the December 
2014 update of the Provider-Specific File (PSF) that is used for 
payment purposes. Although the analyses of the proposed changes to 
the capital prospective payment system do not incorporate cost data, 
we used the December 2014 update of the most recently available 
hospital cost report data (FYs 2012 and 2013) to categorize 
hospitals. Our analysis has several qualifications. We use the best 
data available and make assumptions about case-mix and beneficiary 
enrollment as described below.
    Due to the interdependent nature of the IPPS, it is very 
difficult to precisely quantify the impact associated with each 
proposed change. In addition, we draw upon various sources for the 
data used to categorize hospitals in the tables. In some cases (for 
instance, the number of beds), there is a fair degree of variation 
in the data from different sources. We have attempted to construct 
these variables with the best available sources overall. However, it 
is possible that some individual hospitals are placed in the wrong 
category.
    Using cases from the December 2014 update of the FY 2014 MedPAR 
file, we simulated payments under the capital IPPS for FY 2015 and 
FY 2016 for a comparison of total payments per case. Any short-term, 
acute care hospitals not paid under the general IPPS (for example, 
Indian Health Service hospitals and hospitals in Maryland) are 
excluded from the simulations.
    The methodology for determining a capital IPPS payment is set 
forth at Sec.  412.312. The basic methodology for calculating the

[[Page 24675]]

proposed capital IPPS payments in FY 2016 is as follows:

(Standard Federal Rate) x (DRG weight) x (GAF) x (COLA for hospitals 
located in Alaska and Hawaii) x (1 + DSH Adjustment Factor + IME 
adjustment factor, if applicable).

    In addition to the other adjustments, hospitals may receive 
outlier payments for those cases that qualify under the threshold 
established for each fiscal year. We modeled payments for each 
hospital by multiplying the capital Federal rate by the GAF and the 
hospital's case-mix. We then added estimated payments for indirect 
medical education, disproportionate share, and outliers, if 
applicable. For purposes of this impact analysis, the model includes 
the following assumptions:
     We estimate that the Medicare case-mix index will 
increase by 0.5 percent in both FYs 2015 and 2016.
     We estimate that Medicare discharges will be 
approximately 11.2 million in FY 2015 and 11.3 million in FY 2016.
     The capital Federal rate was updated beginning in FY 
1996 by an analytical framework that considers changes in the prices 
associated with capital-related costs and adjustments to account for 
forecast error, changes in the case-mix index, allowable changes in 
intensity, and other factors. As discussed in section III.A.1.a. of 
the Addendum to this proposed rule, the proposed update is 1.3 
percent for FY 2016.
     In addition to the proposed FY 2016 update factor, the 
proposed FY 2016 capital Federal rate was calculated based on a 
proposed GAF/DRG budget neutrality adjustment factor of 0.9976 and a 
proposed outlier adjustment factor of 0.9357. As discussed in 
section VI.C. of the preamble of this proposed rule, we are not 
proposing to make an additional MS-DRG documentation and coding 
adjustment to the capital IPPS Federal rates for FY 2016.

2. Results

    We used the actuarial model described above to estimate the 
potential impact of our proposed changes for FY 2016 on total 
capital payments per case, using a universe of 3,366 hospitals. As 
described above, the individual hospital payment parameters are 
taken from the best available data, including the December 2014 
update of the FY 2014 MedPAR file, the December 2014 update to the 
PSF, and the most recent cost report data from the December 2014 
update of HCRIS. In Table III, we present a comparison of estimated 
total payments per case for FY 2015 and estimated total payments per 
case for FY 2016 based on the proposed FY 2016 payment policies. 
Column 2 shows estimates of payments per case under our model for FY 
2015. Column 3 shows estimates of payments per case under our model 
for FY 2016. Column 4 shows the proposed total percentage change in 
payments from FY 2015 to FY 2016. The proposed change represented in 
Column 4 includes the proposed 1.3 percent update to the capital 
Federal rate and other proposed changes in the adjustments to the 
capital Federal rate. The comparisons are provided by: (1) 
geographic location; (2) region; and (3) payment classification.
    The simulation results show that, on average, proposed capital 
payments per case in FY 2016 are expected to increase as compared to 
capital payments per case in FY 2015. This expected increase is due 
to the proposed approximately 0.8 percent increase in the capital 
Federal rate for FY 2016 as compared to the FY 2015 capital Federal 
rate and, to a lesser degree, proposed changes to the MS-DRG 
reclassifications and recalibrations and proposed changes in outlier 
payments. (For a discussion of the determination of the capital 
Federal rate, we refer readers to section III.A. of the Addendum to 
this proposed rule.) Overall, across all hospitals, the proposed 
changes to the GAFs are expected to slightly increase capital 
payments. However, regionally, the effects of the proposed changes 
to the GAFs on capital payments are consistent with the projected 
changes in payments due to proposed changes in the wage index (and 
proposed policies affecting the wage index) as shown in Table I in 
section I.G. of this Appendix.
    The increase in capital payments per case due to the effects of 
proposed changes to the MS-DRG reclassifications and recalibrations 
is expected to be slightly greater for urban hospitals, as are the 
increases in capital payments per case due to proposed changes in 
outlier payments. However, most of the urban and rural areas would 
experience an offset to the projected increase in capital payments 
per case due to the effects of proposed changes to the GAFs.
    The net impact of these proposed changes is an estimated 2.0 
percent change in capital payments per case from FY 2015 to FY 2016 
for all hospitals (as shown below in Table III).
    The geographic comparison shows that, on average, hospitals in 
all classifications (urban and rural) would experience an increase 
in capital IPPS payments per case in FY 2016 as compared to FY 2015. 
Capital IPPS payments per case for hospitals in ``large urban 
areas'' have an estimated increase of 2.2 percent, while hospitals 
in rural areas, on average, are expected to experience a 0.9 percent 
increase in capital payments per case from FY 2015 to FY 2016. 
Capital IPPS payments per case for ``other urban hospitals'' are 
estimated to increase 1.9 percent. The primary factor contributing 
to the difference in the proposed projected increase in capital IPPS 
payments per case for urban hospitals as compared to rural hospitals 
is the proposed changes in the GAFs. Rural hospitals in all but two 
rural regions are projected to experience a decrease in capital 
payments due to the effect of proposed changes in the GAFs, while 
hospitals in only half of the urban regions are projected to 
experience a decrease in capital payments due to the effect of the 
proposed changes in the GAFs.
    The comparisons by region show that the estimated increases in 
capital payments per case from FY 2015 to FY 2016 in urban areas 
range from a 2.7 percent increase for the Pacific urban region to a 
1.5 percent increase for the East South Central and New England 
urban regions, and a 0.5 percent increase for Puerto Rico. For rural 
regions, the Pacific rural region is projected to experience the 
largest increase in capital IPPS payments per case of 1.8 percent; 
the Middle Atlantic rural region is projected to experience the 
smallest increase in capital IPPS payments per case of 0.3 percent; 
and the West South Central rural region is projected to have no 
change in capital payments per case in FY 2016 compared to FY 2015 
payments per case. In most urban and rural regions, proposed changes 
in the GAFs contribute to only a small projected increase in capital 
payments, for example, proposed changes in the GAFs are a major 
factor for the West South Central rural region, which is not 
expected to experience any increase in capital payments per case in 
FY 2016 compared to FY 2015. However, the proposed changes in the 
GAFs have the opposite effect for the Pacific urban and rural 
regions where they are a primary contributor to the expected larger 
than average increase in capital IPPS payments per case.
    Hospitals of all types of ownership (that is, voluntary 
hospitals, government hospitals, and proprietary hospitals) are 
expected to experience an increase in capital payments per case from 
FY 2015 to FY 2016. The proposed increase in capital payments for 
voluntary and proprietary hospitals is estimated to be 1.9 percent. 
For government hospitals, the proposed increase is estimated to be 
2.1 percent.
    Section 1886(d)(10) of the Act established the MGCRB. Hospitals 
may apply for reclassification for purposes of the wage index for FY 
2016. Reclassification for wage index purposes also affects the GAFs 
because that factor is constructed from the hospital wage index. To 
present the effects of the hospitals being reclassified as of the 
publication of this proposed rule for FY 2016, we show the proposed 
average capital payments per case for reclassified hospitals for FY 
2016. Urban reclassified hospitals are expected experience an 
increase in capital payments of 2.4 percent; urban nonreclassified 
hospitals are expected to experience an increase in capital payments 
of 1.9 percent. The estimated percentage increase for rural 
reclassified hospitals is 1.3 percent, and for rural nonreclassified 
hospitals, the estimated percentage increase is 0.8 percent.

[[Page 24676]]



                                Table III--Comparison of Total Payments Per Case
                            [FY 2015 payments compared to proposed FY 2016 payments]
----------------------------------------------------------------------------------------------------------------
                                                                             Average proposed
                                          Number of       Average FY 2015   FY 2016 payments/        Change
                                          hospitals        payments/case           case
----------------------------------------------------------------------------------------------------------------
By Geographic Location:
    All hospitals...................              3,366                873                890                2.0
        Large urban areas                         1,390                965                986                2.2
         (populations over 1
         million)...................
        Other urban areas                         1,140                836                851                1.9
         (populations of 1 million
         of fewer)..................
        Rural areas.................                836                592                598                0.9
    Urban hospitals.................              2,530                906                925                2.0
        0-99 beds...................                666                738                749                1.5
        100-199 beds................                777                791                806                1.8
        200-299 beds................                446                830                847                1.9
        300-499 beds................                428                921                941                2.1
        500 or more beds............                213              1,081              1,105                2.2
    Rural hospitals.................                836                592                598                0.9
        0-49 beds...................                329                491                497                1.2
        50-99 beds..................                298                549                556                1.1
        100-149 beds................                121                592                597                0.8
        150-199 beds................                 48                649                654                0.8
        200 or more beds............                 40                708                713                0.7
By Region:
    Urban by Region.................              2,530                906                925                2.0
        New England.................                120                995              1,010                1.5
        Middle Atlantic.............                318              1,006              1,030                2.4
        South Atlantic..............                407                804                820                2.0
        East North Central..........                396                871                888                1.9
        East South Central..........                150                770                782                1.5
        West North Central..........                165                892                907                1.7
        West South Central..........                382                823                838                1.9
        Mountain....................                161                937                955                1.9
        Pacific.....................                380              1,151              1,182                2.7
        Puerto Rico.................                 51                399                402                0.5
    Rural by Region.................                836                592                598                0.9
        New England.................                 22                818                822                0.6
        Middle Atlantic.............                 55                581                583                0.3
        South Atlantic..............                128                555                563                1.4
        East North Central..........                116                617                625                1.2
        East South Central..........                164                539                543                0.7
        West North Central..........                101                638                645                1.1
        West South Central..........                165                525                525                0.0
        Mountain....................                 61                665                675                1.4
        Pacific.....................                 24                772                786                1.8
By Payment Classification:
    All hospitals...................              3,366                873                890                2.0
    Large urban areas (populations                1,383                966                987                2.2
     over 1 million)................
    Other urban areas (populations                1,096                840                856                1.9
     of 1 million of fewer).........
    Rural areas.....................                887                605                610                0.8
    Teaching Status:
        Non-teaching................              2,325                741                754                1.7
        Fewer than 100 Residents....                794                850                867                1.9
        100 or more Residents.......                247              1,231              1,260                2.4
        Urban DSH:
            100 or more beds........              1,572                929                949                2.1
            Less than 100 beds......                333                665                677                1.8
        Rural DSH:
            Sole Community (SCH/                    253                558                566                1.3
             EACH)..................
            Referral Center (RRC/                   220                663                667                0.7
             EACH)..................
            Other Rural:
                100 or more beds....                 33                586                577               -1.4
                Less than 100 beds..                275                488                494                1.1
    Urban teaching and DSH:
        Both teaching and DSH.......                846              1,004              1,026                2.2
        Teaching and no DSH.........                132                915                931                1.8
        No teaching and DSH.........              1,059                780                795                1.9
        No teaching and no DSH......                442                807                823                1.9
    Rural Hospital Types:
        Non special status hospitals              2,701                901                920                2.1
        RRC/EACH....................                211                728                735                1.0
        SCH/EACH....................                327                666                674                1.3
        SCH, RRC and EACH...........                125                725                733                1.2

[[Page 24677]]

 
Hospitals Reclassified by the
 Medicare Geographic Classification
 Review Board:
    FY2016 Reclassifications:
        All Urban Reclassified......                585                926                949                2.4
        All Urban Non-Reclassified..              1,894                903                920                1.9
        All Rural Reclassified......                276                627                636                1.3
        All Rural Non-Reclassified..                505                544                548                0.8
        Other Reclassified Hospitals                 48                597                586               -1.8
         (Section 1886(d)(8)(B))....
    Type of Ownership:
        Voluntary...................              1,934                886                903                1.9
        Proprietary.................                880                788                802                1.9
        Government..................                529                918                938                2.1
    Medicare Utilization as a
     Percent of Inpatient Days:
        0-25........................                713                979              1,000                2.2
        25-50.......................              2,110                874                891                1.9
        50-65.......................                332                739                752                1.7
        Over 65.....................                 66                758                774                2.1
----------------------------------------------------------------------------------------------------------------

J. Effects of Proposed Payment Rate Changes and Policy Changes 
Under the LTCH PPS

1. Introduction and General Considerations

    In section VII. of the preamble of this proposed rule and 
section V. of the Addendum to this proposed rule, we set forth the 
proposed annual update to the payment rates for the LTCH PPS for FY 
2016. In the preamble of this proposed rule, we specify the 
statutory authority for the proposed provisions that are presented, 
identify those proposed policies, and present rationales for our 
proposed decisions as well as alternatives that were considered. In 
this section of Appendix A to this proposed rule, we discuss the 
impact of the proposed changes to the payment rate, factors, and 
other payment rate policies related to the LTCH PPS that are 
presented in the preamble of this proposed rule in terms of their 
estimated fiscal impact on the Medicare budget and on LTCHs.
    There are 418 LTCHs included in this impacts analysis, which 
includes data for 78 nonprofit (voluntary ownership control) LTCHs, 
326 proprietary LTCHs, and 14 LTCHs that are government-owned and 
operated. (We note that, although there are currently approximately 
430 LTCHs, for purposes of this impact analysis, we excluded the 
data of all inclusive rate providers and the LTCHs that are paid in 
accordance with demonstration projects, consistent with the 
development of the proposed FY 2016 MS-LTC-DRG relative weights 
(discussed in section VII.C.3.c. of the preamble of this proposed 
rule)). In the impact analysis, we used the proposed payment rate, 
factors, and policies presented in this proposed rule, including the 
proposed application of the new site neutral payment rate required 
by section 1886(m)(6)(A) of the Act (discussed in section VII.B. of 
the preamble of this proposed rule), the proposed 1.9 percent annual 
update to the LTCH PPS standard Federal payment rate in accordance 
with section 1886(m)(5)(C) of the Act (which is based on the full 
estimated increase of the proposed LTCH PPS market basket and the 
reductions required by sections 1886(m)(3) and (m)(4) of the Act), 
the proposed update to the MS-LTC-DRG classifications and relative 
weights for the LTCH PPS standard Federal payment rate cases, the 
proposed update to the wage index values and labor-related share for 
the LTCH PPS standard Federal payment rate cases, and the best 
available claims and CCR data to estimate the proposed change in 
payments for FY 2016.
    Under the new statutory dual-rate LTCH PPS structure, there will 
be two distinct payment rates for LTCH discharges beginning in FY 
2016. Under this statutory change, as discussed in section VII.B. of 
the preamble of this proposed rule, we are proposing to provide 
payment for LTCH discharges that meet the criteria for exclusion 
from site neutral payment rate (that is, LTCH PPS standard Federal 
payment rate cases) based on the LTCH PPS standard Federal payment 
rate. In addition, consistent with the statute, we are proposing 
that the site neutral payment rate is the lower of the IPPS 
comparable per diem amount as determined under Sec.  412.529(d)(4), 
including any applicable outlier payments as specified in Sec.  
412.525(a); or 100 percent of the estimated cost of the case as 
determined under existing Sec.  412.529(d)(2). In addition, under 
our proposals, there would be two separate HCO targets--one for LTCH 
PPS standard Federal payment rate cases and one for site neutral 
payment rate cases. The statute also establishes a transitional 
payment method for cases that will be paid the site neutral payment 
rate for LTCH discharges occurring in cost reporting periods 
beginning during FY 2016 or FY 2017. As discussed more fully in 
section VII.B.4.b. of the preamble of this proposed rule, the 
transitional payment amount for site neutral payment rate cases is a 
blended payment rate, which would be calculated as 50 percent of the 
applicable site neutral payment rate amount for the discharge as 
determined under proposed new Sec.  412.522(c)(1) and 50 percent of 
the applicable LTCH PPS standard Federal payment rate for the 
discharge determined under Sec.  412.523.
    Based on the best available data for the 418 LTCHs in our 
database that were considered in the analyses used for this proposed 
rule, we estimate that overall LTCH PPS payments in FY 2016 would 
decrease by approximately 4.6 percent (or about $251 million). This 
projection takes into account estimated payments for LTCH cases that 
would have met the new statutory patient-level criteria and been 
paid the LTCH PPS standard Federal payment rate if that rate had 
been in effect at the time of the discharge, and estimated payments 
for LTCH cases that would not have met those new statutory patient-
level criteria and been paid under the site neutral payment rate if 
that rate had been in effect at the time of the discharge described 
below.
    Because the statute specifies that the site neutral payment rate 
effective date for a given LTCH is determined based on the date on 
which that LTCH's cost reporting period begins on or after October 
1, 2015, our estimate of FY 2016 LTCH PPS payments for site neutral 
payment rate cases includes an adjustment to account for this 
rolling effective date. Our proposed approach, applied to the FY 
2014 data that were used for the analyses in this proposed rule, 
accounts for the fact that LTCHs with cost reporting periods that 
begin after October 1, 2015, will continue to be paid for all 
discharges (including those that do not meet the patient-level 
criteria for exclusion from the site neutral payment rate) at the 
LTCH PPS standard Federal payment rate until the start of their 
first cost reporting period beginning after October 1, 2015. 
Therefore, in order to estimate total LTCH PPS payments for site 
neutral payment rate cases in FY 2016, we first identified LTCHs 
with cost reporting periods that would begin in the first quarter of 
FY 2016 (that is, October through December 2015), and modeled those 
LTCHs estimated FY 2016 site neutral payment rate payments based on 
the proposed transitional blended payment rate.

[[Page 24678]]

We then modeled the estimated first quarter FY 2016 payments to 
LTCHs with cost reporting periods that would begin after the first 
quarter of FY 2016 using the LTCH PPS standard Federal payment rate. 
We then identified the LTCHs with cost reporting periods that would 
begin in each of the remaining three quarters of FY 2016, and 
applied an analogous analysis to estimate payments in each 
respective quarter of FY 2016. (For full details on our proposed 
method of estimating payments under our proposals for FY 2016, we 
refer readers to the description presented in section V.D.4. of the 
Addendum to this proposed rule.) We believe that this approach is a 
reasonable means of taking the rolling effective date into account 
when estimating FY 2016 payments.
    Based on the FY 2014 LTCH cases that were used for the analyses 
in this proposed rule, approximately 46 percent of LTCH cases would 
have been classified as site neutral payment rate cases if the site 
neutral payment rate had been in effect in FY 2014 (that is, 46 
percent of such LTCH cases would not have met the patient-level 
criteria for exclusion from the site neutral payment rate). Our 
Office of the Actuary estimates that the percent of LTCH PPS cases 
that will be paid at the site neutral payment rate in FY 2016 will 
not change significantly from the historical data. Taking into 
account the proposed transitional blended payment rate and other 
proposed policies applicable to the site neutral payment rate cases 
in FY 2016, and our approach to account for the rolling effective 
date for the new site neutral payment rate, we estimate that 
aggregate LTCH PPS payments for these site neutral payment rate 
cases will decrease by approximately 14.3 percent (or about $293 
million).
    Approximately 54 percent of LTCH cases are expected to meet the 
patient-level criteria for exclusion from the site neutral payment 
rate in FY 2016, and be paid based on the LTCH PPS standard Federal 
payment rate for the full year. We estimate that total LTCH PPS 
payments for these LTCH PPS standard Federal payment rate cases in 
FY 2016 would increase approximately 1.2 percent (or approximately 
$42 million). This estimated increase in LTCH PPS payments for LTCH 
PPS standard Federal payment rate cases in FY 2016 is primarily a 
result of the proposed 1.9 percent annual update to the LTCH PPS 
standard Federal payment rate for FY 2016 (discussed in section V.A. 
of the Addendum to this proposed rule) and an estimated decrease in 
HCO payments for these cases.
    Based on the 418 LTCHs that were represented in the FY 2014 LTCH 
cases that were used for the analyses in this proposed rule, we 
estimate that aggregate FY 2016 LTCH PPS payments would be 
approximately $5.169 billion, as compared to estimated aggregate FY 
2015 LTCH PPS payments of approximately $5.420 billion, resulting in 
an estimated overall decrease in LTCH PPS payments of approximately 
$251 million. Because the combined distributional effects and 
estimated payment changes exceed $100 million, this proposed rule is 
a major economic rule. We note that this estimated $251 million 
decrease in LTCH PPS payments in FY 2016 (which includes estimated 
payments for LTCH PPS standard Federal payment rate cases and site 
neutral payment rate cases) does not reflect changes in LTCH 
admissions or case-mix intensity, which would also affect the 
overall payment effects of what is proposed in this rule.
    The LTCH PPS standard Federal payment rate for FY 2015 is 
$41,043.71. For FY 2016, we are proposing to establish a LTCH PPS 
standard Federal payment rate of $41,883.93, which reflects the 
proposed 1.9 percent annual update to the LTCH PPS standard Federal 
payment rate and the proposed area wage budget neutrality factor of 
1.001444 to ensure that the proposed changes in the wage indexes and 
labor-related share do not influence aggregate payments. For LTCHs 
that fail to submit data for the LTCH QRP, in accordance with 
section 1886(m)(5)(C) of the Act, we are proposing to establish a 
LTCH PPS standard Federal payment rate of $41,061.87. This proposed 
reduced LTCH PPS standard Federal payment rate reflects the proposed 
updates described above as well as the required 2.0 percentage point 
reduction to the annual update for failure to submit data to the 
LTCH QRP. We note that the proposed factors described above to 
determine the FY 2016 LTCH PPS standard Federal payment rate are 
applied to the FY 2015 LTCH PPS standard Federal rate set forth 
under Sec.  412.523(c)(3)(xi) (that is, $41,034.71).
    Table IV (column 6) shows that the estimated change attributable 
solely to the proposed annual update to the LTCH PPS standard 
Federal payment rate is projected to result in an increase of 1.6 
percent in payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2015 to FY 2016, on average, for all 
LTCHs. In addition to the annual update to the LTCH PPS standard 
Federal payment rate for FY 2016, this estimated increase in 
aggregate proposed LTCH PPS payments to LTCH PPS standard Federal 
payment rate cases of 1.6 percent shown in column 6 of Table IV also 
includes estimated payments for SSO cases that are paid using 
special methodologies that are not affected by the annual update to 
the LTCH PPS standard Federal payment rate, as well as the penalty 
that is applied to the annual update of LTCHs that do not submit the 
required LTCH QRP data. Therefore, for all hospital categories, the 
projected increase in payments based on the LTCH PPS standard 
Federal payment rate to LTCH PPS standard Federal payment rate cases 
is somewhat less than the proposed 1.9 percent annual update for FY 
2016.
    As discussed in section V.B. of the Addendum to this proposed 
rule, we are proposing to update the wage index values for FY 2016 
based on the most recent available data, and we are proposing to 
continue to use labor market areas based on the OMB CBSA 
delineations. In addition, we are proposing to slightly lower the 
labor-related share from 62.306 percent to 62.2 percent under the 
LTCH PPS for FY 2016, based on the most recent available data on the 
relative importance of the proposed labor-related share of operating 
and capital costs based on the FY 2009-based LTCH-specific market 
basket. We also are proposing to apply an area wage level budget 
neutrality factor of 1.001444 to ensure that the proposed changes to 
the wage data and labor-related share do not result in a change in 
estimated aggregate LTCH PPS payments to LTCH PPS standard Federal 
payment rate cases, which increases the proposed LTCH PPS standard 
Federal payment rate by approximately 0.14 percent.
    We currently estimate total HCO payments for LTCH PPS standard 
Federal payment rate cases are projected to decrease from FY 2015 to 
FY 2016. Using the FY 2014 LTCH cases that were used for the 
analyses in this proposed rule, we estimate that the FY 2015 HCO 
threshold of $14,972 (as established in the FY 2015 IPPS/LTCH PPS 
final rule) would result in estimated HCO payments for LTCH PPS 
standard Federal payment rate cases in FY 2015 that are above the 
estimated 8 percent target. Specifically, we currently estimate that 
HCO payments for LTCH PPS standard Federal payment rate cases will 
be approximately 8.6 percent of the estimated total LTCH PPS 
standard Federal payment rate payments in FY 2015. Combined with our 
estimate that FY 2016 HCO payments for LTCH PPS standard Federal 
payment rate cases would be 8.0 percent of estimated total LTCH PPS 
standard Federal rate payments in FY 2016, this results in the 
estimated decrease of approximately 0.6 percent between FY 2015 and 
FY 2016.
    In calculating these estimated HCO payments we increased 
estimated costs by our actuaries' projected market basket percentage 
increase factor. This increase in estimated costs also results in a 
projected increase in SSO payments in FY 2016. We estimate that 
these increased SSO payments in FY 2016 would increase total 
payments for LTCH PPS standard Federal rate payment cases by 0.2 
percent. (Payments for SSO cases represent approximately 12.5 
percent of the estimated total LTCH PPS payments for standard 
Federal payment rate cases.)
    Table IV below shows the estimated impact of the proposed 
payment rate and policy changes on LTCH PPS payments for LTCH PPS 
standard Federal payment rate cases for FY 2016 by comparing 
estimated FY 2015 LTCH PPS payments to estimated FY 2016 LTCH PPS 
payments. (As noted earlier, our analysis does not reflect changes 
in LTCH admissions or case-mix intensity.) The projected increase in 
payments from FY 2015 to FY 2016 for LTCH PPS standard Federal 
payment rate cases of 1.2 percent is attributable to the impacts of 
the proposed change to the LTCH PPS standard Federal payment rate 
(1.6 percent in Column 6) and the effect of the estimated decrease 
in HCO payments for LTCH PPS standard Federal payment cases (-0.6 
percent), and the estimated increase in proposed payments for SSO 
cases (0.2 percent).
    As we discuss in detail throughout this proposed rule, based on 
the most recent available data, we believe that the provisions of 
this proposed rule relating to the LTCH PPS, which are projected to 
result in an overall decrease in estimated aggregate LTCH PPS 
payments, and the resulting LTCH PPS payment amounts would result in 
appropriate Medicare payments that are consistent with the statute.

[[Page 24679]]

2. Impact on Rural Hospitals

    For purposes of section 1102(b) of the Act, we define a small 
rural hospital as a hospital that is located outside of an urban 
area and has fewer than 100 beds. As shown in Table IV, we are 
projecting a 1.2 percent increase in estimated payments for LTCH PPS 
standard Federal payment rate cases. This estimated impact is based 
on the FY 2014 data for the 21 rural LTCHs (out of 418 LTCHs) that 
were used for the analyses in this proposed rule. We note that these 
impacts do not include LTCH PPS site neutral payment rate cases for 
the reasons discussed in section J.3 of this Appendix.

3. Anticipated Effects of Proposed LTCH PPS Payment Rate Changes and 
Policy Changes

a. Budgetary Impact

    Section 123(a)(1) of the BBRA requires that the PPS developed 
for LTCHs ``maintain budget neutrality.'' We believe that the 
statute's mandate for budget neutrality applies only to the first 
year of the implementation of the LTCH PPS (that is, FY 2003). 
Therefore, in calculating the FY 2003 standard Federal rate under 
Sec.  412.523(d)(2), we set total estimated payments for FY 2003 
under the LTCH PPS so that estimated aggregate payments under the 
LTCH PPS were estimated to equal the amount that would have been 
paid if the LTCH PPS had not been implemented.
    Section 1886(m)(6)(A) of the Act establishes a new dual-rate 
LTCH PPS payment structure with two distinct payment rates for LTCH 
discharges beginning in FY 2016. As discussed in section VII.B. of 
the preamble of this proposed rule, under this statutory change, 
LTCH discharges that meet the patient-level criteria for exclusion 
from the site neutral payment rate (that is, LTCH PPS standard 
Federal payment rate cases) would be paid based on the LTCH PPS 
standard Federal payment rate. LTCH discharges that would be paid at 
the site neutral payment rate would generally be paid the lower of 
the IPPS comparable per diem amount, including any applicable HCO 
payments or 100 percent of the estimated cost of the case. The 
statute also establishes a transitional payment method for cases 
that will be paid at the site neutral payment rate for LTCH 
discharges occurring in cost reporting periods beginning during FY 
2016 or FY 2017, under which the site neutral payment rate cases 
would be paid a blended payment rate calculated as 50 percent of the 
applicable site neutral payment rate amount for the discharge and 50 
percent of the applicable LTCH PPS standard Federal payment rate for 
the discharge. (For additional details on the proposed application 
of the site neutral payment rate beginning in FY 2016, we refer 
readers to section VII.B. of the preamble of this proposed rule.)
    As discussed above in section I.J.1. of this Appendix, we 
project a decrease in aggregate LTCH PPS payments in FY 2016 of 
approximately $251 million. This estimated decrease in payments 
reflects the projected increase in payments to LTCH PPS standard 
Federal payment rate cases of approximately $42 million and the 
projected decrease in payments to site neutral payment rate cases of 
approximately $293 million under the new dual-rate LTCH PPS payment 
rate structure required by the statute beginning in FY 2016.
    As discussed in section VII.B.7.b. of the preamble of this 
proposed rule, our actuaries project cost and resource changes for 
site neutral payment rate cases due to the site neutral payment 
rates required under the statute. Specifically, our actuaries 
project that the costs and resource use for cases paid at the site 
neutral payment rate would likely be lower, on average, than the 
costs and resource use for cases paid at the LTCH PPS standard 
Federal payment rate, and would likely mirror the costs and resource 
use for IPPS cases assigned to the same MS-DRG. While we are able to 
incorporate this projection at an aggregate level into our payment 
modeling, because the historical claims data that we are using in 
this proposed rule to project estimated FY 2016 LTCH PPS payments 
(that is, FY 2014 LTCH claims data) do not reflect this actuarial 
projection, we are unable to model the impact of the change in LTCH 
PPS payments for site neutral payment rate cases at the same level 
of detail with which we are able to model the impacts of the changes 
to LTCH PPS payments for LTCH PPS standard Federal payment rate 
cases. Therefore, Table IV below only reflects changes in LTCH PPS 
payments for LTCH PPS standard Federal payment rate cases and, 
unless otherwise noted, the remaining discussion in section J.3 
refers only to the impact on LTCH PPS payments for LTCH PPS standard 
Federal payment rate cases. Below we present our provider impact 
analysis for the proposed changes that affect LTCH PPS payments for 
LTCH PPS standard Federal payment rate cases.

b. Impact on Providers

    Under the new dual-rate LTCH PPS payment structure, the statute 
establishes two distinct payment rates for LTCH discharges occurring 
in cost reporting periods beginning on or after October 1, 2015. 
Under that statute, any discharges that occur on or after October 1, 
2015, but prior to the start of the LTCH's FY 2016 cost reporting 
period will be paid at the LTCH PPS standard Federal payment rate. 
On or after the start of an LTCH's FY 2016 cost reporting period, 
discharges are paid based on the nature of the case. As described 
previously, LTCH PPS standard Federal payment rate cases are defined 
as LTCH discharges that would meet the proposed patient-level 
criteria to be excluded from the typically lower site neutral 
payment rate, and site neutral payment rate cases are defined as 
LTCH discharges that would not meet the proposed patient-level 
criteria and would generally be paid the generally lower site 
neutral payment rate. For discharges occurring in cost reporting 
periods beginning in FY 2016 or 2017, however, the statute specifies 
that site neutral payment rate cases will be paid based on a 
transitional payment method that would be calculated as 50 percent 
of the applicable site neutral payment rate amount and 50 percent of 
the applicable LTCH PPS standard Federal payment rate.
    The basic methodology for determining a per discharge payment 
for LTCH PPS standard Federal payment rate cases is set forth under 
Sec.  412.515 through Sec.  412.536. In addition to adjusting the 
LTCH PPS standard Federal payment rate by the MS-LTC-DRG relative 
weight, we make adjustments to account for area wage levels and 
SSOs. LTCHs located in Alaska and Hawaii also have their payments 
adjusted by a COLA. As explained previously, under our proposed 
application of the new dual-rate LTCH PPS payment structure required 
under section 1886(m)(6) of the Act, the LTCH PPS standard Federal 
payment rate would generally only be used to determine payments for 
LTCH PPS standard Federal payment rate cases (that is, those LTCH 
PPS cases that meet the statutory criteria to be excluded from the 
site neutral payment rate). Under the new statutory changes to the 
LTCH PPS, LTCH discharges that would not meet the statutory patient-
level criteria for exclusion would be paid the site neutral payment 
rate, which we are proposing to calculate as the lower of the IPPS 
comparable per diem amount as determined under Sec.  412.529(d)(4), 
including any applicable outlier payments, or 100 percent of the 
estimated cost of the case as determined under existing Sec.  
412.529(d)(2). In addition, when certain thresholds are met, LTCHs 
also would be able to receive HCO payments for both LTCH PPS 
standard Federal payment rate cases and site neutral payment rate 
cases that are paid at the IPPS comparable per diem amount.
    To understand the impact of the changes to the LTCH PPS payments 
for LTCH PPS standard Federal payment rate cases presented in this 
proposed rule on different categories of LTCHs for FY 2016, it is 
necessary to estimate payments per discharge for FY 2015 using the 
rates, factors, and the policies established in the FY 2015 IPPS/
LTCH PPS final rule and estimate payments per discharge for FY 2016 
using the rates, factors, and the policies proposed in this FY 2016 
IPPS/LTCH PPS proposed rule (as discussed in section VII. of the 
preamble of this proposed rule and section V. of the Addendum to 
this proposed rule). As discussed elsewhere in this rule, these 
estimates are based on the best available LTCH claims data and other 
factors, such as the application of inflation factors to estimate 
costs for SSO and HCO cases in each year. The resulting analyses can 
then be used to compare how our proposals applicable to LTCH PPS 
standard Federal payment rate cases affect different groups of 
LTCHs.
    For the following analysis, we group hospitals based on 
characteristics provided in the OSCAR data, FY 2012 through FY 2013 
cost report data in HCRIS, and PSF data. Hospital groups included 
the following:
     Location: large urban/other urban/rural.
     Participation date.
     Ownership control.
     Census region.
     Bed size.

c. Calculation of LTCH PPS Payments for LTCH PPS Standard Federal 
Payment Rate Cases

    For purposes of this impact analysis, to estimate the per 
discharge payment effects of our proposed policies on payments for 
LTCH PPS standard Federal payment rate cases, we simulated FYs 2015 
and 2016 payments on

[[Page 24680]]

a case-by-case basis using historical LTCH claims from the FY 2014 
MedPAR files that would have met the criteria to be paid at the LTCH 
PPS standard Federal payment rate if the statutory patient-level 
criteria had been in effect at the time of discharge for those 
cases. For modeling FY 2015 LTCH PPS payments, we used the FY 2015 
standard Federal rate of $41,043.71, or $40,240.51 for LTCHs that 
failed to submit quality data as required under the requirements of 
the LTCH QRP, which reflects the 2.0 percentage points reduction 
required by section 1886(m)(5)(C) of the Act. Similarly, for 
modeling FY 2016 LTCH PPS standard Federal rate payments, we used 
the proposed FY 2016 standard Federal payment rate of $41,883.93, or 
$41,061.87 for LTCHs that failed to submit quality data as required 
under the requirements of the LTCH QRP, again, to reflect the 2.0 
percentage points reduction required by section 1886(m)(5)(C) of the 
Act. In each case, we applied the applicable adjustments for area 
wage levels and the COLA for LTCHs located in Alaska and Hawaii. 
Specifically, for modeling FY 2015 LTCH PPS payments, we used the 
current FY 2015 labor-related share (62.306 percent); the wage index 
values established in the Tables 12A through 12D listed in the 
Addendum to the FY 2015 IPPS/LTCH PPS final rule (which are 
available via the Internet on the CMS Web site), including the 
transitional blended wage index for the implementation of the CBSA 
delineations in FY 2015; the FY 2015 fixed-loss amount for LTCH PPS 
standard Federal payment rate cases of $14,972 (as discussed in 
section V.D. of the Addendum to that final rule) and the FY 2015 
COLA factors (shown in the table in section V.C. of the Addendum to 
that final rule) to adjust the FY 2015 nonlabor-related share 
(37.694 percent) for LTCHs located in Alaska and Hawaii. Similarly, 
for modeling FY 2016 LTCH PPS payments, we used the proposed FY 2016 
LTCH PPS labor-related share (62.2 percent), the proposed FY 2016 
wage index values from Tables 12A and 12B listed in section VI. of 
the Addendum to this proposed rule (which are also available via the 
Internet on the CMS Web site), the proposed FY 2016 fixed-loss 
amount for LTCH PPS standard Federal payment rate cases of $18,768 
(as discussed in section V.D.3. of the Addendum to this proposed 
rule), and the proposed FY 2016 COLA factors (shown in the table in 
section V.C. of the Addendum to this proposed rule) to adjust the 
proposed FY 2016 nonlabor-related share (37.8 percent) for LTCHs 
located in Alaska and Hawaii.
    As discussed above, our impact analysis reflects an estimated 
change in payments for SSO cases, as well as an estimated decrease 
in HCO payments for LTCH PPS standard Federal payment rate cases (as 
described previously in section J.1. of this Appendix). In modeling 
proposed payments for SSO and HCO cases for LTCH PPS standard 
Federal payment rate cases, we applied an inflation factor of 5.0 
percent (determined by the Office of the Actuary) to update the 2014 
costs of each case.
    The impacts presented below reflect the estimated ``losses'' or 
``gains'' among the various classifications of LTCHs from FY 2015 to 
FY 2016 based on the proposed payment rates and policy changes 
applicable to LTCH PPS standard Federal payment rate cases presented 
in this proposed rule. Table IV illustrates the estimated aggregate 
impact of the change in LTCH PPS payments for LTCH PPS standard 
Federal payment rate cases among various classifications of LTCHs. 
(As discussed previously, these impacts do not include LTCH PPS site 
neutral payment rate cases.)
     The first column, LTCH Classification, identifies the 
type of LTCH.
     The second column lists the number of LTCHs of each 
classification type.
     The third column identifies the number of LTCH cases 
expected to meet the LTCH PPS standard Federal payment rate 
criteria.
     The fourth column shows the estimated FY 2015 payment 
per discharge for LTCH cases expected to meet the LTCH PPS standard 
Federal payment rate criteria (as described above).
     The fifth column shows the estimated FY 2016 payment 
per discharge for LTCH cases expected to meet the LTCH PPS standard 
Federal payment rate criteria (as described above).
     The sixth column shows the percentage change in 
estimated payments per discharge for LTCH cases expected to meet the 
LTCH PPS standard Federal payment rate criteria from FY 2015 to FY 
2016 due to the proposed annual update to the standard Federal rate 
(as discussed in section V.A.2. of the Addendum to this proposed 
rule).
     The seventh column shows the percentage change in 
estimated payments per discharge for LTCH cases expected to meet the 
LTCH PPS standard Federal payment rate criteria from FY 2015 to FY 
2016 for proposed changes to the area wage level adjustment (that 
is, the proposed wage indexes and the proposed labor-related share), 
including the application of a proposed area wage level budget 
neutrality factor (as discussed in section V.B. of the Addendum to 
this proposed rule).
     The eighth column shows the percentage change in 
estimated payments per discharge for LTCH cases expected to meet the 
LTCH PPS standard Federal payment rate criteria from FY 2015 (Column 
4) to FY 2016 (Column 5) for all proposed changes (and includes the 
effect of estimated changes to HCO and SSO payments).

[[Page 24681]]



                                  Table IV--Impact of Proposed Payment Rate and Policy Changes to LTCH PPS Payments for Standard Payment Rate Cases for FY 2016
                                                               [Estimated FY 2015 Payments Compared to Estimated FY 2016 Payments]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                             Proposed percent
                                                                                                                                          Proposed percent      change in       Proposed percent
                                                                                                                       Proposed average      change in      payments per case      change in
                                                                                  Number of LTCH    Average FY 2015    FY 2016 LTCH PPS  payments per case   due to proposed   payments per case
                    LTCH classification                       Number of LTCHs      PPS standard     LTCH PPS payment   standard federal  due to the annual    changes to the    from FY 2015 to
                                                                                 federal payment        per case         payment rate      update to the     area wage level    FY 2016 for all
                                                                                    rate cases                         payment per case  LTCH PPS standard   adjustment with    proposed changes
                                                                                                                             \1\          federal rate \2\  budget neutrality         \4\
                                                                                                                                                                   \3\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
(1)                                                                        (2)                (3)                (4)                (5)                (6)                (7)                (8)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
ALL PROVIDERS..............................................                416             73,427            $46,024            $46,564                1.6                0.0                1.2
BY LOCATION:
    RURAL..................................................                 21              2,156            $39,110            $39,284                1.5               -0.8                0.4
    URBAN..................................................                395             71,271            $46,233            $46,784                1.6                0.0                1.2
        LARGE..............................................                197             42,434            $48,434            $49,023                1.6                0.1                1.2
        OTHER..............................................                198             28,837            $42,993            $43,489                1.6               -0.2                1.2
BY PARTICIPATION DATE:
    BEFORE OCT. 1983.......................................                 13              2,057            $42,043            $43,120                1.6                0.7                2.6
    OCT. 1983--SEPT. 1993..................................                 43              9,076            $51,663            $52,209                1.6                0.1                1.1
    OCT. 1993--SEPT. 2002..................................                179             32,454            $44,666            $45,290                1.7                0.0                1.4
    OCTOBER 2002 and AFTER.................................                181             29,840            $46,059            $46,469                1.6               -0.1                0.9
BY OWNERSHIP TYPE:                                           .................  .................  .................  .................  .................  .................  .................
    VOLUNTARY..............................................                 77              9,907            $46,853            $47,348                1.6                0.0                1.1
    PROPRIETARY............................................                326             62,153            $45,776            $46,324                1.6                0.0                1.2
    GOVERNMENT.............................................                 13              1,367            $51,255            $51,789                1.6               -0.1                1.0
BY REGION:                                                   .................  .................  .................  .................  .................  .................  .................
    NEW ENGLAND............................................                 13              2,907            $41,660            $42,687                1.5                0.7                2.5
    MIDDLE ATLANTIC........................................                 28              5,296            $51,636            $51,981                1.7               -0.1                0.7
    SOUTH ATLANTIC.........................................                 61             12,072            $46,280            $46,832                1.6                0.1                1.2
    EAST NORTH CENTRAL.....................................                 69             12,164            $46,524            $47,034                1.7                0.0                1.1
    EAST SOUTH CENTRAL.....................................                 33              5,146            $44,648            $44,996                1.6                0.0                0.8
    WEST NORTH CENTRAL.....................................                 25              3,777            $46,228            $46,678                1.6               -0.2                1.0
    WEST SOUTH CENTRAL.....................................                129             19,498            $40,447            $41,060                1.6               -0.1                1.5
    MOUNTAIN...............................................                 33              4,245            $46,867            $47,528                1.6                0.2                1.4
    PACIFIC................................................                 25              8,322            $56,266            $56,714                1.6               -0.2                0.8
BY BED SIZE:
    BEDS: 0-24.............................................                 27              1,517            $42,268            $42,916                1.6                0.5                1.5
    BEDS: 25-49............................................                191             24,668            $44,141            $44,640                1.6               -0.1                1.1
    BEDS: 50-74............................................                119             20,342            $46,764            $47,129                1.6               -0.3                0.8
    BEDS: 75-124...........................................                 46             12,998            $49,200            $49,817                1.6                0.2                1.3
    BEDS: 125-199..........................................                 21              7,703            $45,705            $46,370                1.6                0.1                1.5
    BEDS: 200 +............................................                 12              6,199            $45,741            $46,676                1.7                0.3                2.0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Estimated FY 2016 LTCH PPS payments to LTCH cases that are expected to meet the LTCH PPS standard Federal payment rate criteria based on the proposed payment rate and factor changes
  applicable to LTCH PPS standard Federal payment rate cases presented in the preamble of and the Addendum to this proposed rule.
\2\ Percent change in estimated payments per discharge for LTCH cases that are expected to meet the LTCH PPS standard Federal payment rate criteria from FY 2015 to FY 2016 for the proposed
  annual update to the LTCH PPS standard Federal rate.
\3\ Percent change in estimated payments per discharge for LTCH cases that are expected to meet the LTCH PPS standard Federal payment rate criteria from FY 2015 to FY 2016 for proposed changes
  to the area wage level adjustment under Sec.   412.525(c) (as discussed in section V.B. of the Addendum to this proposed rule).
\4\ Percent change in estimated payments per discharge for LTCH cases that are expected to meet the LTCH PPS standard Federal payment rate criteria from FY 2015 (shown in Column 4) to FY 2016
  (shown in Column 5), including all of the proposed changes to the rates and factors applicable to LTCH PPS standard Federal payment rate cases presented in the preamble and the Addendum to
  this proposed rule. Note, this column, which shows the percent change in estimated payments per discharge for all proposed changes, does not equal the sum of the percent changes in estimated
  payments per discharge for the proposed annual update to the LTCH PPS standard Federal payment rate (column 6) and the proposed changes to the area wage level adjustment with budget
  neutrality (Column 7) due to the effect of estimated changes in both estimated payments to SSO cases that are paid based on estimated costs and aggregate HCO payments for LTCH cases that are
  expected to meet the LTCH PPS standard Federal payment rate criteria (as discussed in this impact analysis), as well as other interactive effects that cannot be isolated.


[[Page 24682]]

d. Results

    Based on the FY 2014 LTCH cases (from 418 LTCHs) that were used 
for the analyses in this proposed rule, we have prepared the 
following summary of the impact (as shown above in Table IV) of the 
proposed LTCH PPS payment rate and proposed policy changes for LTCH 
PPS standard Federal payment rate cases presented in this proposed 
rule. The impact analysis in Table IV shows that estimated payments 
per discharge for LTCH PPS standard Federal payment rate cases are 
expected to increase 1.2 percent, on average, for all LTCHs from FY 
2015 to FY 2016 as a result of the proposed payment rate and policy 
changes applicable to LTCH PPS standard Federal payment rate cases 
presented in this proposed rule. This estimated 1.2 percent increase 
in LTCH PPS payments per discharge to LTCH PPS standard Federal 
payment rate cases from FY 2015 to FY 2016 for all LTCHs (as shown 
in Table IV) was determined by comparing estimated FY 2016 LTCH PPS 
payments (using the proposed payment rates and factors discussed in 
this proposed rule) to estimated FY 2015 LTCH PPS payments for LTCH 
discharges which would be LTCH PPS standard Federal payment rate 
cases if the new statutory dual-rate LTCH PPS payment structure had 
been in effect at the time of the discharge (as described in section 
I.J.3. of this Appendix).
    As stated previously, we are proposing to update the LTCH PPS 
standard Federal payment rate for FY 2016 by 1.9 percent based on 
the latest estimate of the LTCH PPS market basket increase (2.7 
percent), the proposed reduction of 0.6 percentage point for the MFP 
adjustment, and the 0.2 percentage point reduction consistent with 
sections 1886(m)(3) and (m)(4) of the Act. For LTCHs that fail to 
submit quality data under the requirements of the LTCH QRP, as 
required by section 1886(m)(5)(C) of the Act, a 2.0 percentage point 
reduction would be applied to the proposed annual update to the 
standard Federal rate. As explained earlier in this section, for 
most categories of LTCHs (as shown in Table IV, Column 6), the 
proposed payment increase due to the proposed 1.9 percent annual 
update to the LTCH PPS standard Federal payment rate is projected to 
result in approximately a 1.6 percent increase in estimated payments 
per discharge for LTCH PPS standard Federal payment rate cases for 
all LTCHs from FY 2015 to FY 2016. This is because our estimate of 
the proposed changes in payments due to the proposed update to the 
LTCH PPS standard Federal payment rate also reflects estimated 
payments for SSO cases that will be paid using special methodologies 
that are not affected by the update to the LTCH PPS standard Federal 
payment rate. Consequently, we estimate that proposed payments to 
LTCH PPS standard Federal payment rate cases may increase by less 
than 1.9 percent for certain hospital categories due to the proposed 
annual update to the LTCH PPS standard Federal payment rate for FY 
2016.

(1) Location

    Based on the most recent available data, the vast majority of 
LTCHs are located in urban areas. Only approximately 5 percent of 
the LTCHs are identified as being located in a rural area, and 
approximately 3 percent of all LTCH PPS standard Federal payment 
rate cases are expected to be treated in these rural hospitals. The 
impact analysis presented in Table IV shows that the overall average 
percent increase in estimated payments per discharge for LTCH PPS 
standard Federal payment rate cases from FY 2015 to FY 2016 for all 
hospitals is 1.2 percent. For rural LTCHs, the overall percent 
change for LTCH PPS standard Federal payment rate cases is estimated 
to be a 0.4 percent increase, while for urban LTCHs, we estimate the 
increase would be 1.2 percent. Both large urban and other urban 
LTCHs are projected to experience an increase of 1.2 percent in 
estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2015 to FY 2016, as shown in Table IV.

(2) Participation Date

    LTCHs are grouped by participation date into four categories: 
(1) before October 1983; (2) between October 1983 and September 
1993; (3) between October 1993 and September 2002; and (4) October 
2002 and after. Based on the most recent available data, the 
categories of LTCHs with the largest expected percentage of LTCH PPS 
standard Federal payment rate cases (approximately 44 percent) are 
in LTCHs that began participating in the Medicare program between 
October 1993 and September 2002, and they are projected to 
experience a 1.4 percent increase in estimated payments per 
discharge for LTCH PPS standard Federal payment rate cases from FY 
2015 to FY 2016, as shown in Table IV.
    Approximately 3 percent of LTCHs began participating in the 
Medicare program before October 1983, and these LTCHs are projected 
to experience a higher than average percent increase (2.6 percent) 
in estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases from FY 2015 to FY 2016, as shown in Table IV, 
which is primarily due to a projected larger than average increase 
in payments due to the proposed changes to the area wage adjustment. 
Approximately 10 percent of LTCHs began participating in the 
Medicare program between October 1983 and September 1993. These 
LTCHs are projected to experience a 1.1 percent increase in 
estimated payments for LTCH PPS standard Federal payment rate cases 
from FY 2015 to FY 2016. LTCHs that began participating in the 
Medicare program after October 1, 2002, which treat approximately 40 
percent of all LTCH PPS standard Federal payment rate cases, are 
projected to experience a 0.9 percent increase in estimated payments 
from FY 2015 to FY 2016.

(3) Ownership Control

    LTCHs are grouped into three categories based on ownership 
control type: Voluntary, proprietary, and government. Based on the 
most recent available data, approximately 19 percent of LTCHs are 
identified as voluntary (Table IV). The majority (nearly 78 percent) 
of LTCHs are identified as proprietary while government-owned and 
operated LTCHs represent approximately 3 percent of LTCHs. Based on 
ownership type, voluntary LTCHs are expected to experience an 
average increase in payments to LTCH PPS standard Federal payment 
rate cases of 1.1 percent; proprietary LTCHs are expected to 
experience an increase of 1.2 percent in payments to LTCH PPS 
standard Federal payment rate cases, while government-owned and 
operating LTCHs are expected to experience an increase in payments 
to LTCH PPS standard Federal payment rate cases of 1.0 percent from 
FY 2015 to FY 2016.

(4) Census Region

    Estimated payments per discharge for LTCH PPS standard Federal 
payment rate cases for FY 2016 are projected to increase for LTCHs 
located in all regions in comparison to FY 2015. Of the 9 census 
regions, we project that the increase in estimated payments per 
discharge to LTCH PPS standard Federal payment rate cases would have 
the largest positive impact on LTCHs in the New England region (2.5 
percent as shown in Table IV), which is largely attributable to the 
proposed changes in the area wage level adjustment.
    In contrast, LTCHs located in the Middle Atlantic, East South 
Central, and Pacific regions are projected to experience the 
smallest increase in estimated payments per discharge for LTCH PPS 
standard Federal payment rate cases from FY 2015 to FY 2016. The 
lower than national average estimated increase in payments of 0.7 
percent for the Middle Atlantic regions and 0.8 percent for the East 
South Central and Pacific regions is primarily due to estimated 
decreases in payments associated with the proposed changes to the 
area wage level adjustment.

(5) Bed Size

    LTCHs are grouped into six categories based on bed size: 0-24 
beds; 25-49 beds; 50-74 beds; 75-124 beds; 125-199 beds; and greater 
than 200 beds. All bed size categories are projected to receive an 
increase in estimated payments per discharge for LTCH PPS standard 
Federal payment rate cases from FY 2015 to FY 2016. We project that 
large LTCHs (200+ beds) would experience a 2.0 percent increase in 
payments for LTCH PPS standard Federal payment rate cases, which is 
higher than the national average mostly due to a larger than average 
increase from the proposed area wage level adjustment. Similarly, we 
project that both small LTCHs (0-24 beds) and relatively large LTCHs 
(125-199 beds) would experience a 1.5 percent increase in payments 
for LTCH PPS standard Federal payment rate cases, which is also 
higher than the national average mostly due to increases in the 
proposed area wage level adjustment. LTCHs with 25 to 49 beds and 75 
to 124 beds are expected to experience a nearly average increase in 
payments per discharge for LTCH PPS standard Federal payment rate 
cases from FY 2015 to FY 2016 (1.1 percent and 1.3 percent, 
respectively), while LTCHs with between 50 and 74 beds are expected 
to experience a smaller than average increase in payments per 
discharge for LTCH PPS standard Federal payment rate cases from FY 
2015 to FY 2016 (0.8 percent).

4. Effect on the Medicare Program

    As stated previously, we project that the provisions of this 
proposed rule would result

[[Page 24683]]

in an increase in estimated aggregate LTCH PPS payments to LTCH PPS 
standard Federal payment rate cases in FY 2016 relative to FY 2015 
of approximately $42 million (or approximately 1.2 percent) for the 
418 LTCHs in our database. Although, as stated previously, the 
hospital-level impacts do not include LTCH PPS site neutral payment 
rate cases, we estimate that the provisions of this proposed rule 
would result in a decrease in estimated aggregate LTCH PPS payments 
to site neutral payment rate cases in FY 2016 relative to FY 2015 of 
approximately $293 million (or approximately 14.3 percent) for the 
418 LTCHs in our database. Therefore, we project that the provisions 
of this proposed rule would result in a decrease in estimated 
aggregate LTCH PPS payments to all cases in FY 2016 relative to FY 
2015 of approximately $251 million (or approximately 4.6 percent) 
for the 418 LTCHs in our database.

5. Effect on Medicare Beneficiaries

    Under the LTCH PPS, hospitals receive payment based on the 
average resources consumed by patients for each diagnosis. We do not 
expect any changes in the quality of care or access to services for 
Medicare beneficiaries as a result of this proposed rule, but we 
continue to expect that paying prospectively for LTCH services will 
enhance the efficiency of the Medicare program.

K. Effects of Proposed Requirements for the Hospital Inpatient 
Quality Reporting (IQR) Program

    In section VIII.A. of the preamble of this proposed rule, we 
discuss our proposed requirements for hospitals to report quality 
data under the Hospital IQR Program in order to receive the full 
annual percentage increase for the FY 2018 payment determination.
    In this proposed rule, we are proposing to remove nine measures 
from the Hospital IQR Program for the FY 2018 payment determination 
and subsequent years:
     STK-01 Venous Thromboembolism (VTE) Prophylaxis (NQF 
#0434);
     STK-06: Discharged on Statin Medication* (NQF #0439);
     STK-08: Stroke Education* (NQF endorsement removed);
     VTE-1: Venous Thromboembolism Prophylaxis* (NQF #0371);
     VTE-2: Intensive Care Unit Venous Thromboembolism 
Prophylaxis* (NQF #0372);
     VTE-3: Venous Thromboembolism Patients with 
Anticoagulation Overlap Therapy* (NQF #0373);
     AMI-7a Fibrinolytic Therapy Received Within 30 Minutes 
of Hospital Arrival* (NQF #0164);
     IMM-1 Pneumococcal Immunization (NQF #1653); and
     SCIP-Inf-4 Cardiac Surgery Patients with Controlled 
Postoperative Blood Glucose (NQF #0300).
    (An asterisk (*) indicates that the measure is proposed for 
retention as an electronic clinical quality measure for the FY 2018 
payment determination in section VIII.A.8. of the preamble of this 
proposed rule.)
    The anticipated effect of removing these measures would be a 
reduction in the burden associated with the collection of chart-
abstracted data. Due to the burden associated with the collection of 
chart-abstracted data, we estimate that the proposed removal of AMI-
7a would result in a burden reduction of approximately 219,000 hours 
across all hospitals. We estimate that the proposed removal of the 6 
VTE and STK chart-abstracted measures would result in a burden 
reduction of approximately 522,000 hours across all hospitals. The 
remaining two measures proposed for removal have been previously 
suspended from the Hospital IQR Program. Therefore, their proposed 
removal would not affect burden to hospitals. In total, we estimate 
that the removal of 6 measures would result in a total burden 
reduction of approximately 741,000 hours for the FY 2018 payment 
determination across all hospitals.
    We are retaining six of the chart-abstracted measures proposed 
for removal as electronic clinical quality measures. We believe that 
retaining a variety of electronic clinical quality measures would 
result in increased hospital familiarity with electronic reporting. 
We further believe retaining some measures as electronic clinical 
quality measures would not affect the overall burden, as these 
measures were available for electronic reporting under previous 
requirements.
    In this proposed rule, we are proposing refinements to the 
measure cohorts for: (1) The Hospital 30-Day, All-Cause, Risk-
Standardized Mortality Rate (RSMR) Following Pneumonia 
Hospitalization measure (NQF #0468); and (2) the Hospital 30-Day, 
All-Cause, Risk-Standardized Readmission Rate (RSRR) Following 
Pneumonia Hospitalization measure (NQF #0506). Expanding the measure 
cohort to include a broader population of patients adds a large 
number of patients, as well as additional hospitals, to the CMS 30-
day Pneumonia RSMR and RSRR measures. However, this expansion would 
not affect the burden on hospitals or hospital performance on the 
Hospital IQR Program because these measures are claims-based and, 
therefore, require no additional effort on hospitals' part to submit 
the required data.
    We also are proposing to add eight additional measures to the 
Hospital IQR Program measure set beginning with the FY 2018 payment 
determination and for subsequent years. Seven of these measures are 
claims-based, and one measure is structural. The eight proposed new 
measures are:
     Hospital Survey on Patient Safety Culture (structural);
     Kidney/UTI Clinical Episode-Based Payment (claims-
based);
     Cellulitis Clinical Episode-Based Payment (claims-
based);
     Gastrointestinal Hemorrhage Clinical Episode-Based 
Payment (claims-based);
     (Lumbar Spine Fusion/Re-Fusion Clinical Episode-Based 
Payment (claims-based);
     Hospital-Level, Risk-Standardized Payment Associated 
with an Episode-of-Care for Primary Elective THA/TKA (claims-based);
     Excess Days in Acute Care after Hospitalization for 
Acute Myocardial Infarction (claims-based); and
     Excess Days in Acute Care after Hospitalization for 
Heart Failure (claims-based).
    We believe adopting the seven claims-based measures above would 
have no effect on hospital burden because they do not require 
additional effort on the part of hospitals. We further believe 
adopting the Hospital Survey on Patient Safety Culture measure would 
have a negligible effect on hospital burden, but may result in 
hospital staff spending time to respond to the Survey.
    For the FY 2018 payment determination and subsequent years, we 
also are proposing to require hospitals to submit 16 measures 
electronically using CEHRT 2014 for the Hospital IQR Program in a 
manner that would permit eligible hospitals to partially align 
Hospital IQR Program requirements with some requirements under the 
Medicare EHR Incentive Program. We believe this proposal would 
increase the burden associated with electronic clinical quality 
measure reporting because electronic reporting was previously 
voluntary. The total burden increase is estimated to be 5 hours and 
20 minutes per hospital.
    We note that we are proposing to change the requirements for 
population and sampling such that hospitals would be required to 
submit population and sample size data only for those measures that 
a hospital submits as chart-abstracted measures under the Hospital 
IQR Program. We believe this proposal would result in a minimal 
decrease in burden as hospitals would not have to report population 
and sample size if they electronically report any of the measures 
that can be reported either as an electronic clinical quality 
measure or via chart-abstraction.
    We also note that we are proposing to modify the existing 
processes for validation of chart-abstracted Hospital IQR Program 
data to remove one stratum. This proposal would not affect hospital 
burden. Detailed information on the estimated burden specifically 
associated with information collection for the Hospital IQR Program 
for the FY 2018 payment determination is included in section X.B.6 
of the preamble of this proposed rule.
    In addition to the activities described above, participation in 
the Hospital IQR Program requires hospitals to participate in a 
number of other activities, including: (1) Reviewing reports for 
claims-based measure sets; (2) completing HAI validation templates 
for CLABSI and CAUTI; (3) completing HAI validation templates for 
MRSA bacteremia and CDI; and (4) completing other forms and 
structural measures. The cumulative effects of these activities on 
facility burden are expected to be substantially similar to that 
stated for FY 2017.
    In general, however, we anticipate that, because of the new 
requirements we are proposing for reporting for the FY 2018 payment 
determination (if finalized), the number of hospitals not receiving 
the full annual percentage increase may be higher than average. 
Information is not available to determine the precise number of 
hospitals that would not meet the proposed requirements to receive 
the full annual percentage increase for the FY 2018 payment 
determination. Historically, 100 hospitals, on average, that 
participate in the Hospital IQR Program do not receive the full 
annual

[[Page 24684]]

percentage increase in any fiscal year. We anticipate that, because 
of the new requirements we are proposing for reporting for the FY 
2018 payment determination (if finalized), the number of hospitals 
not receiving the full annual percentage increase may be higher than 
average. The highest number of hospitals failing to meet program 
requirements was approximately 200 after the introduction of new 
NHSN reporting requirements. If the number of hospitals failing does 
increase because of the new requirements, we anticipate that, over 
the long run, this number would decline as hospitals gain more 
experience with these requirements.
    Finally, under OMB Control Number 0938-1022, we estimated that 
the total burden for the FY 2017 payment determinations was 1,781 
hours per hospital and 5.9 million hours across approximately 3,300 
hospitals participating in the Hospital IQR Program. We estimate 
here that the total burden for the FY 2018 payment determination 
would increase to 2,293 hours per hospital and 7.6 million hours 
across approximately 3,300 hospitals due to the proposals discussed 
above and updates to the historical data used to determine the 
number of cases reported and time for reporting per measure set. The 
table below describes the hospital burden associated with the 
Hospital IQR Program requirements.

                                             Burden Impact of Hospital IQR Program Requirements for FY 2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Burden per hospital  for      Burden per hospital  for all
Hospital IQR program requirement  Number of  hospitals  impacted       previously  finalized        requirements  as proposed     Net change  in burden
                                                                           requirements           (continuing,  removed, added)        per hospital
--------------------------------------------------------------------------------------------------------------------------------------------------------
Chart-abstracted and structural   3,300.........................  1,131 hours...................  906 hours....................  -225 hours.
 measures, forms.
Review reports for claims-based   3,300.........................  4 hours.......................  4 hours......................  0.
 measures.
Electronic Clinical Quality       Unknown.......................  0 hours (electronic clinical    5 hours 20 minutes...........  +5 hours 20 minutes.
 Measure Reporting.                                                quality measure reporting
                                                                   voluntary for FY 2017).
Validation templates............  Up to 600.....................  72 hours......................  107 hours....................  +35 hours.
Electronic Clinical Quality       Up to 100.....................  16 hours......................  0 hours (no test this year)..  -16 hours.
 Measure validation test.
Validation charts photocopying..  Up to 600.....................  $8,496........................  $12,960......................  +$4,464.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    In implementing the Hospital IQR Program and other quality 
reporting programs, we have focused on measures that have high 
impact and support CMS and HHS priorities for improved quality and 
efficiency of care for Medicare beneficiaries.

L. Effects of Proposed Requirements for the PPS-Exempt Cancer 
Hospital Quality Reporting (PCHQR) Program for FY 2018

    In section VIII.B. of the preamble of this proposed rule, we 
discuss our proposed policies for the quality data reporting program 
for PPS-exempt cancer hospitals (PCHs), which we refer to as the 
PPS-Exempt Cancer Hospital Quality Reporting (PCHQR) Program. The 
PCHQR Program is authorized under section 1866(k) of the Act, which 
was added by section 3005 of the Affordable Care Act.
    In section VIII.B.3. of the preamble of this proposed rule, we 
are proposing that PCHs will submit data on three additional 
measures beginning with the FY 2018 program: (1) The CDC NHSN 
Facility-Wide Inpatient Hospital-Onset Methicillin-Resistant 
Staphylococcus aureus (MRSA) Bacteremia Outcome Measure (NQF #1716); 
(2) the CDC NHSN Facility-Wide Inpatient Hospital-Onset Clostridium 
difficile Infection (CDI) Outcome Measure (NQF #1717); and, (3) the 
CDC NHSN Influenza Vaccination Coverage Among Healthcare Personnel 
Measure (NQF #0431). In conjunction with our proposal in section 
VIII.B.2. of the preamble of this proposed rule to remove the six 
SCIP measures from the PCHQR Program beginning with fourth quarter 
(Q4) 2015 discharges and for subsequent years, the PCHQR measure set 
would consist of 16 measures for the FY 2018 program.
    The impact of the proposed new requirements for the PCHQR 
Program is expected to be minimal overall because all 11 PCHs are 
already submitting quality measure data to the CDC NHSN and are 
familiar with this reporting process. Beginning with Q1 2013 events, 
PCHs have been submitting Central Line-associated Bloodstream 
Infection (CLABSI) and Catheter-Associated Urinary Tract Infection 
(CAUTI) data to the CDC NHSN (77 FR 53566). Similarly, beginning 
with Q1 2014 events, PCHs have been submitting Surgical Site 
Infections (SSI) data to the CDC NHSN (78 FR 50849). As a result, 
PCHs are familiar with the CDC NHSN IT infrastructure and 
programmatic operations. In addition to fostering transparency and 
facilitating public reporting, we believe our requirements uphold 
our goals in improving quality of care and achieving better health 
outcomes, which outweighs burden.
    One expected effect of the PCHQR Program is to keep the public 
informed of the quality of care provided by PCHs. We will publicly 
display quality measure data collected under the PCHQR Program as 
required under the Act. These data will be displayed on the Hospital 
Compare Web site. The goals of making these data available to the 
public in a user-friendly and relevant format include, but are not 
limited to: (1) Allowing the public to compare PCHs in order to make 
informed health care decisions regarding care setting; and (2) 
providing information about current trends in health care. 
Furthermore, PCHs can use their own health care quality data for 
many purposes such as in risk management programs, healthcare 
associated infection prevention programs, and research and 
development activities, among others.

M. Effects of Proposed Requirements for the Long-Term Care Hospital 
Quality Reporting Program (LTCH QRP) for FY 2018

    In section VIII.C.1. of the preamble of this proposed rule, we 
discuss the implementation of section 1886(m)(5) of the Act, which 
was added by section 3004(a) of the Affordable Care Act. Section 
1886(m)(5) of the Act provides that, for rate year 2014 and each 
subsequent year, any LTCH that does not submit data to the Secretary 
in accordance with section 1886(m)(5)(C) and (F) of the Act shall 
receive a 2 percentage point reduction to the annual update to the 
standard Federal rate for discharges for the hospital during the 
applicable fiscal year.
    In the FY 2015 IPPS/LTCH PPS final rule (76 FR 50443 through 
50445), we estimated that only a few LTCHs would not receive the 
full annual percentage increase in any fiscal year as a result of 
failure to submit data under the LTCH QRP. There are approximately 
442 LTCHs currently reporting quality data to CMS. At the time that 
this analysis was prepared, 47, or approximately 10 percent, of 
these LTCHs did not receive the full annual percentage increase for 
the FY 2015 annual payment update determination. Information is not 
available to determine the precise number of LTCHs that will not 
meet the requirements to receive the full annual percentage increase 
for the FY 2016 payment determination.
    We believe that a majority of LTCHs will continue to collect and 
submit data for the FY 2017 payment determination and subsequent 
years because they will continue to view the LTCH QRP as an 
important step in improving the quality of care patients receive in 
the LTCHs. We believe that the burden associated with the LTCH QRP 
is the time and effort associated with data collection.

[[Page 24685]]

    In this FY 2016 IPPS/LTCH PPS proposed rule, we are retaining 12 
previously finalized measures, two of which we are proposing in 
order to establish their use as cross-setting measures that satisfy 
the required addition of quality measures under the domains of skin 
integrity and incidence of major falls, as mandated by the section 
1899B of the Act: Percent of Residents or Patients with Pressure 
Ulcers That Are New or Worsened (Short Stay) (NQF #0678), and an 
Application of Percent of Residents Experiencing One or More Falls 
with Major Injury (Long Stay) (NQF #0674). We are proposing a third 
previously finalized measure, All-Cause Unplanned Readmission 
Measure for 30 Days Post-Discharge From LTCHs (NQF #2512), in order 
to establish the newly NQF-endorsed status of this measure. Finally, 
we are proposing the application of Percent of LTCH Patients With an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function (NQF #2631; under review), which satisfies the 
addition of a quality measure under the third initially required 
domain of functional status, as mandated by section 1899B of the 
Act.
    In the FY 2015 IPPS/LTCH PPS final rule (79 FR 50443 through 
50445) we discussed burden estimates that were inclusive of the 12 
previously finalized measures we are retaining in this proposed 
rule. We previously estimated the total cost for all 12 quality 
measures to be $17,410 per LTCH annually, or $7,695,423 for all 
LTCHs annually (79 FR 50443 through 50445); or $2,992,384 for all 
quality measures reported via the CDC's NHSN; and $4,703,039 for all 
quality measures reported to CMS using the LTCH CARE Data Set 
version 2.0. For a list of the 12 previously finalized measures 
included in the above burden estimate, we refer readers to the FY 
2015 IPPS/LTCH PPS final rule.
    The burden calculation discussed in the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 50443 through 50445) accounts for any burden 
associated with newly proposed measures in this FY 2016 IPPS/LTCH 
PPS proposed rule. The measure Percent of Residents or Patients with 
Pressure Ulcers That Are New or Worsened (Short Stay) (NQF #0678) is 
currently being reported by LTCHs using version 2.01 of the LTCH 
CARE Data Set, which has burden approval under OMB control number 
0938-1163. The burden associated with the proposed application of 
the measure Percent of Residents Experiencing One or More Falls with 
Major Injury (Long Stay) (NQF #0674) is discussed at length in the 
FY 2015 IPPS/LTCH PPS final rule, and is included in the above total 
annual burden figures in that rule, as well as listed above.
    The measure All-Cause Unplanned Readmission Measure for 30 Days 
Post-Discharge from LTCHs (NQF #2512) is calculated based on CMS FFS 
claims data, and therefore does not have any associated data 
reporting burden for LTCH providers.
    The new quality measure we are proposing to include in the LTCH 
QRP, Cross-Setting Functional Status Process Measure: Percent of 
Patients or Residents with an Admission and Discharge Functional 
Assessment and a Care Plan that Addresses Function, is not 
specifically discussed in the FY 2015 IPPS/LTCH PPS final rule. 
However, the data elements used to report this quality measure to 
CMS are included in that discussion and burden estimate in that 
final rule, because we are proposing to use a subset of the same 
data elements that are used to report the previously finalized 
measure Percent of Long-Term Care Hospital Patients with an 
Admission and Discharge Functional Assessment and a Care Plan That 
Addresses Function, which is included in that burden estimate. 
Therefore, the proposed addition of this quality measure to the LTCH 
QRP does not increase burden on LTCHs.
    Currently, LTCHs use two separate data collection mechanisms to 
report quality data to CMS: The CDC's NHSN, which is used to report 
all Healthcare Associated Infection (HAI) and vaccination data (used 
to calculate CAUTI, CLABSI, MRSA, CDI, VAE, and healthcare personnel 
Influenza vaccination measures); and the Quality Improvement and 
Evaluation System Assessment Submission and Processing (QIES-ASAP) 
system, which is used by LTCHs to report quality data via the LTCH 
CARE Data Set.
    The data collection burden associated with the reporting of the 
quality measures (HAI and vaccination) reported via the CDC's NHSN 
is discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 50443 
through 50445). However, we note that these measures are stewarded 
by the CDC, and the reporting burden is approved under OMB control 
number 0920-0666.
    The remaining quality measures are reported to CMS by LTCHs 
using the LTCH CARE Data Set (LCDS). Currently, LTCHs are using 
version 2.01 of the LCDS (approved under OMB control number 0938-
1163) which includes data elements related to two quality measures: 
Percent of Patients or Residents with Pressure Ulcers that are new 
or Worsened (NQF #0678), and Percent of Residents or Patients Who 
Were Assessed and Appropriately Given the Seasonal Influenza Vaccine 
(NQF #0680).
    We have developed a subsequent iteration of the LCDS (version 
3.0), which will also include data elements for the three quality 
measures we previously finalized in the FY 2015 IPPS/LTCH PPS final 
rule: Application of Percent of Residents Experiencing One or More 
Falls with Major Injury (Long Stay) (NQF #0674); Percent of Long-
Term Care Hospital Patients with an Admission and Discharge 
Functional Assessment and a Care Plan That Addresses Function (NQF 
#2631--under NQF review); and Functional Status Outcome Measure: 
Change in Mobility Among Long-Term Care Hospital Patients Requiring 
Ventilator Support (NQF #2632--under NQF review). We refer readers 
to section X.B.9. of the preamble of this proposed rule for a 
discussion of the additional data elements in Version 3.0 of the 
LCDS.
    Version 3.0 of the LTCH CARE Data Set will also be used to 
report the newly proposed measure Cross-Setting Functional Status 
Process Measure: Percent of Patients or Residents with an Admission 
and Discharge Functional Assessment and a Care Plan that Addresses 
Function. However, the data items that will inform this measure are 
a subset of the data elements currently used to report the LTCH-
specific measure, Percent of Long-Term Care Hospital Patients with 
an Admission and Discharge Functional Assessment and a Care Plan 
That Addresses Function (NQF #2631--under review by NQF). Therefore 
this proposed measure would not add any data collection burden 
beyond that discussed in the FY 2015 IPPS/LTCH PPS final rule (79 FR 
50443 through 50445), in which NQF #2631 was finalized.
    LTCH burden related to the submission of version 3.0 of the 
LCDS, has been previously discussed in the FY 2015 IPPS/LTCH PPS 
final rule (79 FR 50443 through 50445), and is included in the total 
annual burden noted in that rule, which is $17,410 per LTCH 
annually, or $7,695,423 for all LTCHs annually. We believe that this 
estimate remains unchanged as a result of the LTCH QRP proposals in 
this proposed rule.

N. Effects of Proposed Requirements Regarding Electronic Health 
Record (EHR) Meaningful Use Program

    In section VIII.D. of the preamble of this proposed rule, we 
discuss proposed requirements for the EHR Incentive Program. We are 
proposing CQM reporting requirements, including reporting periods 
and submission periods, as well as CQMs required and information 
about CQM specifications' updates, for the Medicare EHR Incentive 
Program for eligible hospitals and CAHs for 2016. We note that these 
proposals would only apply for eligible hospitals and CAHs 
submitting CQMs electronically in CY 2016. Because these proposals 
for data collection would align with the reporting requirements in 
place for the Hospital IQR Program and eligible hospitals and CAHs 
still have the option to submit their clinical quality measures via 
attestation for the Medicare EHR Incentive Program, we do not 
believe these proposals would have a significant impact.

II. Alternatives Considered

    This proposed rule contains a range of proposed policies. It 
also provides descriptions of the statutory provisions that are 
addressed, identifies the proposed policies, and presents rationales 
for our decisions and, where relevant, alternatives that were 
considered.

III. Overall Conclusion

1. Acute Care Hospitals

    Table I of section I.G. of this Appendix demonstrates the 
estimated distributional impact of the IPPS budget neutrality 
requirements for the proposed MS-DRG and wage index changes, and for 
the wage index reclassifications under the MGCRB. Table I also shows 
an overall increase of 0.3 percent in operating payments. As 
discussed in section I.G. of this Appendix, we estimate that 
proposed operating payments will increase by approximately $278 
million in FY 2016 relative to FY 2015. However, when we account for 
the impact of the changes in Medicare DSH payments and the impact of 
the new additional payments based on uncompensated care in 
accordance with section 3133 of the Affordable Care Act, based on 
estimates provided by the CMS

[[Page 24686]]

Office of the Actuary, consistent with our policy discussed in 
section IV.D. of the preamble of this proposed rule, we estimate 
that operating payments will decrease by approximately $11 million 
relative to FY 2015. We currently estimate that the changes in new 
technology add-on payments for FY 2016 will decrease spending by 
approximately $31 million due to the expiration of three new 
technology add-on payments. This estimate, combined with our 
estimated decrease in FY 2016 operating payment of $11 million, 
result in an estimated decrease of approximately $42 million for FY 
2016. We estimate that hospitals will experience a 2.0 percent 
increase in capital payments per case, as shown in Table III of 
section I.I. of this Appendix. We project that there will be a $163 
million increase in capital payments in FY 2016 compared to FY 2015. 
The proposed cumulative operating and capital payments would result 
in a net increase of approximately $121 million to IPPS providers. 
The discussions presented in the previous pages, in combination with 
the rest of this proposed rule, constitute a regulatory impact 
analysis.

2. LTCHs

    Overall, LTCHs are projected to experience a decrease in 
estimated payments per discharge in FY 2016. In the impact analysis, 
we are using the proposed rates, factors, and policies presented in 
this proposed rule, including proposed updated wage index values and 
relative weights, and the best available claims and CCR data to 
estimate the change in payments under the LTCH PPS for FY 2016. 
Accordingly, based on the best available data for the 418 LTCHs in 
our database, we estimate that FY 2016 LTCH PPS payments will 
decrease approximately $251 million relative to FY 2015 as a result 
of the proposed payment rates and factors presented in this proposed 
rule.

IV. Accounting Statements and Tables

A. Acute Care Hospitals

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table V below, we 
have prepared an accounting statement showing the classification of 
the expenditures associated with the provisions of this proposed 
rule as they relate to acute care hospitals. This table provides our 
best estimate of the change in Medicare payments to providers as a 
result of the proposed changes to the IPPS presented in this 
proposed rule. All expenditures are classified as transfers to 
Medicare providers.
    The costs to the Federal Government associated with the policies 
in this proposed rule are estimated at $143 million.

   Table V--Accounting Statement: Classification of Proposed Estimated
           Expenditures Under the IPPS From FY 2015 to FY 2016
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  $143 million.
From Whom to Whom......................  Federal Government to IPPS
                                          Medicare Providers.
------------------------------------------------------------------------

B. LTCHs

    As discussed in section I.J. of this Appendix, the impact 
analysis of the payment rates and factors presented in this proposed 
rule under the LTCH PPS, is projected to result in a decrease in 
estimated aggregate LTCH PPS payments in FY 2016 relative to FY 2015 
of approximately -$251 million based on the data for 418 LTCHs in 
our database that are subject to payment under the LTCH PPS. 
Therefore, as required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table VI below, 
we have prepared an accounting statement showing the classification 
of the expenditures associated with the provisions of this proposed 
rule as they relate to the changes to the LTCH PPS. Table VI 
provides our best estimate of the estimated increase in Medicare 
payments under the LTCH PPS as a result of the proposed payment 
rates and factors and other provisions presented in this proposed 
rule based on the data for the 418 LTCHs in our database. All 
expenditures are classified as transfers to Medicare providers (that 
is, LTCHs).
    The savings to the Federal Government associated with the 
proposed policies for LTCHs in this proposed rule are estimated at 
$251 million.

  TABLE VI--Accounting Statement: Classification of Proposed Estimated
     Expenditures From the FY 2015 LTCH PPS to the FY 2016 LTCH PPS
------------------------------------------------------------------------
                Category                            Transfers
------------------------------------------------------------------------
Annualized Monetized Transfers.........  -$251 million.
From Whom to Whom......................  Federal Government to LTCH
                                          Medicare Providers.
------------------------------------------------------------------------

V. Regulatory Flexibility Act (RFA) Analysis

    The RFA requires agencies to analyze options for regulatory 
relief of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organizations, and small 
government jurisdictions. We estimate that most hospitals and most 
other providers and suppliers are small entities as that term is 
used in the RFA. The great majority of hospitals and most other 
health care providers and suppliers are small entities, either by 
being nonprofit organizations or by meeting the SBA definition of a 
small business (having revenues of less than $7.5 million to $38.5 
million in any 1 year). (For details on the latest standards for 
health care providers, we refer readers to page 36 of the Table of 
Small Business Size Standards for NAIC 622 found on the SBA Web site 
at: http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.)
    For purposes of the RFA, all hospitals and other providers and 
suppliers are considered to be small entities. Individuals and 
States are not included in the definition of a small entity. We 
believe that the provisions of this proposed rule relating to acute 
care hospitals would have a significant impact on small entities as 
explained in this Appendix. Because we lack data on individual 
hospital receipts, we cannot determine the number of small 
proprietary LTCHs. Therefore, we are assuming that all LTCHs are 
considered small entities for the purpose of the analysis in section 
I.J. of this Appendix. MACs are not considered to be small entities. 
Because we acknowledge that many of the affected entities are small 
entities, the analysis discussed throughout the preamble of this 
proposed rule constitutes our regulatory flexibility analysis. In 
this proposed rule, we are soliciting public comments on our 
estimates and analysis of the impact of our proposals on those small 
entities. Any public comments that we receive and our responses will 
be presented in the final rule.

VI. Impact on Small Rural Hospitals

    Section 1102(b) of the Social Security Act requires us to 
prepare a regulatory impact analysis for any proposed or final rule 
that may have a significant impact on the operations of a 
substantial number of small rural hospitals. This analysis must 
conform to the provisions of section 603 of the RFA. With the 
exception of hospitals located in certain New England counties, for 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of an urban area and 
has fewer than 100 beds. Section 601(g) of the Social Security 
Amendments of 1983 (Pub. L.

[[Page 24687]]

98-21) designated hospitals in certain New England counties as 
belonging to the adjacent urban area. Thus, for purposes of the IPPS 
and the LTCH PPS, we continue to classify these hospitals as urban 
hospitals. (We refer readers to Table I in section I.G. of this 
Appendix for the quantitative effects of the proposed policy changes 
under the IPPS for operating costs.)

VII. Unfunded Mandates Reform Act Analysis

    Section 202 of the Unfunded Mandates Reform Act of 1995 (Pub. L. 
104-4) also requires that agencies assess anticipated costs and 
benefits before issuing any rule whose mandates require spending in 
any 1 year of $100 million in 1995 dollars, updated annually for 
inflation. In 2015, that threshold level is approximately $144 
million. This proposed rule will not mandate any requirements for 
State, local, or tribal governments, nor will it affect private 
sector costs.

VIII. Executive Order 12866

    In accordance with the provisions of Executive Order 12866, the 
Executive Office of Management and Budget reviewed this proposed 
rule.

Appendix B: Recommendation of Update Factors for Operating Cost Rates 
of Payment for Inpatient Hospital Services

I. Background

    Section 1886(e)(4)(A) of the Act requires that the Secretary, 
taking into consideration the recommendations of MedPAC, recommend 
update factors for inpatient hospital services for each fiscal year 
that take into account the amounts necessary for the efficient and 
effective delivery of medically appropriate and necessary care of 
high quality. Under section 1886(e)(5) of the Act, we are required 
to publish update factors recommended by the Secretary in the 
proposed and final IPPS rules, respectively. Accordingly, this 
Appendix provides the recommendations for the update factors for the 
IPPS national standardized amount, the Puerto Rico-specific 
standardized amount, the hospital-specific rate for SCHs, and the 
rate-of-increase limits for certain hospitals excluded from the 
IPPS, as well as LTCHs. In prior years, we have made a 
recommendation in the IPPS proposed rule and final rule for the 
update factors for the payment rates for IRFs and IPFs. However, for 
FY 2016, we plan to include the Secretary's recommendation for the 
update factors for IRFs and IPFs in separate Federal Register 
documents at the time that we announce the annual updates for IRFs 
and IPFs. We also discuss our response to MedPAC's recommended 
update factors for inpatient hospital services.

II. Inpatient Hospital Update for FY 2016

A. Proposed FY 2016 Inpatient Hospital Update

    As discussed in section IV.B of the preamble to this proposed 
rule, consistent with section 1886(b)(3)(B) of the Act, as amended 
by sections 3401(a) and 10319(a) of the Affordable Care Act, we are 
setting the applicable percentage increase by applying the following 
adjustments in the following sequence. Specifically, the applicable 
percentage increase under the IPPS is equal to the rate-of-increase 
in the hospital market basket for IPPS hospitals in all areas, 
subject to a reduction of one-quarter of the applicable percentage 
increase (prior to the application of other statutory adjustments; 
also referred to as the market basket update or rate-of-increase 
(with no adjustments)) for hospitals that fail to submit quality 
information under rules established by the Secretary in accordance 
with section 1886(b)(3)(B)(viii) of the Act and a 66\2/3\ percent 
reduction to three-fourths of the applicable percentage increase 
(prior to the application of other statutory adjustments; also 
referred to as the market basket update or rate-of-increase (with no 
adjustments)) for hospitals not considered to be meaningful 
electronic health record (EHR) users in accordance with section 
1886(b)(3)(B)(ix) of the Act, and then subject to an adjustment 
based on changes in economy-wide productivity (the multifactor 
productivity (MFP) adjustment), and an additional reduction of 0.2 
percentage point as required by section 1886(b)(3)(B)(xii) of the 
Act. Sections 1886(b)(3)(B)(xi) and (b)(3)(B)(xii) of the Act, as 
added by section 3401(a) of the Affordable Care Act, state that 
application of the MFP adjustment and the additional FY 2016 
adjustment of 0.2 percentage point may result in the applicable 
percentage increase being less than zero.
    Based on the most recent data available for this FY 2016 IPPS/
LTCH PPS proposed rule, in accordance with section 1886(b)(3)(B) of 
the Act, we are proposing to base the proposed FY 2016 market basket 
update used to determine the applicable percentage increase for the 
IPPS on the IHS Global Insight, Inc. (IGI's) first quarter 2015 
forecast of the FY 2010-based IPPS market basket rate-of-increase 
with historical data through fourth quarter 2014, which is estimated 
to be 2.7 percent. In accordance with section 1886(b)(3)(B) of the 
Act, as amended by section 3401(a) of the Affordable Care Act, in 
section IV.A.1. of the preamble of this FY 2016 IPPS/LTCH PPS 
proposed rule, we are proposing an MFP adjustment of 0.6 percent for 
FY 2016. Therefore, based on IGI's first quarter 2015 forecast of 
the FY 2010-based IPPS market basket, depending on whether a 
hospital submits quality data under the rules established in 
accordance with section 1886(b)(3)(B)(viii) of the Act (hereafter 
referred to as a hospital that submits quality data) and is a 
meaningful EHR user under section 1886(b)(3)(B)(ix) of the Act 
(hereafter referred to as a hospital that is a meaningful EHR user), 
there are four possible applicable percentage increases that can be 
applied to the standardized amount. Below we provide a table 
summarizing the four proposed applicable percentage increases.

----------------------------------------------------------------------------------------------------------------
                                                     Hospital        Hospital      Hospital did    Hospital did
                                                     submitted       submitted      NOT submit      NOT submit
                                                   quality data    quality data    quality data    quality data
                     FY 2016                         and is a      and is NOT a      and is a      and is NOT a
                                                  meaningful EHR  meaningful EHR  meaningful EHR  meaningful EHR
                                                       user            user            user            user
----------------------------------------------------------------------------------------------------------------
Proposed Market Basket                                       2.7             2.7             2.7             2.7
 Rate[dash]of[dash]Increase.....................
Proposed Adjustment for Failure to Submit                    0.0             0.0          -0.675          -0.675
 Quality Data under Section 1886(b)(3)(B)(viii)
 of the Act.....................................
Proposed Adjustment for Failure to be a                      0.0           -1.35             0.0           -1.35
 Meaningful EHR User under Section
 1886(b)(3)(B)(ix) of the Act...................
Proposed MFP Adjustment under Section                       -0.6            -0.6            -0.6            -0.6
 1886(b)(3)(B)(xi) of the Act...................
Statutory Adjustment under Section                          -0.2            -0.2            -0.2            -0.2
 1886(b)(3)(B)(xii) of the Act..................
                                                 ---------------------------------------------------------------
Proposed Applicable Percentage Increase Applied              1.9            0.55           1.225          -0.125
 to Standardized Amount.........................
----------------------------------------------------------------------------------------------------------------

B. Proposed Update for SCHs for FY 2016

    Section 1886(b)(3)(B)(iv) of the Act provides that the FY 2016 
applicable percentage increase in the hospital-specific rate for 
SCHs equals the applicable percentage increase set forth in section 
1886(b)(3)(B)(i) of the Act (that is, the same update factor as for 
all other hospitals subject to the IPPS). We note that the MDH 
program expired for discharges beginning on April 1, 2015 under 
current law.
    As mentioned above, the update to the hospital specific rate for 
SCHs is subject to section 1886(b)(3)(B)(i) of the Act, as amended 
by sections 3401(a) and 10319(a) of the Affordable Care Act. 
Accordingly, depending on whether a hospital submits quality data 
and is a meaningful EHR user, we are proposing the same four 
possible applicable percentage increases in the table above to the 
hospital-specific rate applicable to SCHs.

[[Page 24688]]

C. Proposed FY 2016 Puerto Rico Hospital Update

    Section 401(c) of Public Laws 108-173 amended section 
1886(d)(9)(C)(i) of the Act and states that, for discharges 
occurring in a fiscal year (beginning with FY 2004), the Secretary 
shall compute an average standardized amount for hospitals located 
in any area of Puerto Rico that is equal to the average standardized 
amount computed under subclause (I) for FY 2003 for hospitals in a 
large urban area (or, beginning with FY 2005, for all hospitals in 
the previous fiscal year) increased by the applicable percentage 
increase under subsection (b)(3)(B) for the fiscal year involved. 
Therefore, the update to the Puerto Rico-specific operating 
standardized amount is subject to the applicable percentage increase 
set forth in section 1886(b)(3)(B)(i) of the Act as amended by 
sections 3401(a) and 10319(a) of the Affordable Care Act (that is, 
the same update factor as for all other hospitals subject to the 
IPPS). Accordingly, we are proposing an applicable percentage 
increase to the Puerto Rico-specific standardized amount of 1.9 
percent.

D. Proposed Update for Hospitals Excluded From the IPPS

    Section 1886(b)(3)(B)(ii) of the Act is used for purposes of 
determining the percentage increase in the rate-of-increase limits 
for children's hospitals, cancer hospitals, and hospitals located 
outside the 50 States, the District of Columbia, and Puerto Rico 
(that is, short-term acute care hospitals located in the U.S. Virgin 
Islands, Guam, the Northern Mariana Islands, and American Samoa). 
Section 1886(b)(3)(B)(ii) of the Act sets the percentage increase in 
the rate-of-increase limits equal to the market basket percentage 
increase. In accordance with Sec.  403.752(a) of the regulations, 
RNHCIs are paid under the provisions of Sec.  413.40, which also use 
section 1886(b)(3)(B)(ii) of the Act to update the percentage 
increase in the rate-of-increase limits.
    Currently, children's hospitals, PPS-excluded cancer hospitals, 
RNHCIs, and short-term acute care hospitals located in the U.S. 
Virgin Islands, Guam, the Northern Mariana Islands, and American 
Samoa are among the remaining types of hospitals still paid under 
the reasonable cost methodology, subject to the rate-of-increase 
limits. As we finalized in the FY 2015 IPPS/LTCH PPS final rule (79 
FR 50156 through 50157), the FY 2016 rate-of-increase percentage to 
be applied to the target amount for children's hospitals, PPS-
excluded cancer hospitals, RNHCIs, and short-term acute care 
hospitals located in the U.S. Virgin Islands, Guam, the Northern 
Mariana Islands, and American Samoa would be the percentage increase 
in the IPPS operating market basket. For this proposed rule, the 
current estimate of the FY 2016 IPPS operating market basket 
percentage increase is 2.7 percent.

E. Proposed Update for LTCHs for FY 2016

    Section 123 of Public Laws 106-113, as amended by section 307(b) 
of Public Laws 106-554 (and codified at section 1886(m)(1) of the 
Act), provides the statutory authority for updating payment rates 
under the LTCH PPS. Under section 1886(m)(6)(A) of the Act as added 
by section 1206(a) of Public Laws 113-67, beginning in cost 
reporting periods starting on or after October 1, 2015, all LTCH 
discharges are paid according to the site neutral payment rate 
unless certain criteria are met. For LTCH cases that meet the 
criteria for exclusion, the site neutral payment rate does not apply 
and payment will be made without regard to the provisions of section 
1886(m)(6) of the Act. For cases that meet the criteria for 
exclusion from the site neutral payment rate, payment will continue 
to be based on the LTCH PPS standard Federal payment rate as 
determined in Sec.  412.523. (For additional details on the change 
to LTCH PPS payments under section 1886(m)(6)(A) of the Act, 
specifically the establishment of the site neutral payment rate, we 
refer readers to section VII.B.3. of the preamble of this proposed 
rule.)
    As discussed in section V.A. of the Addendum to this proposed 
rule, we are proposing to establish an update to the LTCH PPS 
standard Federal rate for FY 2016 based on the full LTCH PPS market 
basket increase estimate (for this proposed rule, estimated to be 
2.7 percent), subject to an adjustment based on changes in economy-
wide productivity and an additional reduction required by sections 
1886(m)(3)(A)(ii) and (m)(4)(E) of the Act. In accordance with the 
LTCHQRP under section 1886(m)(5) of the Act, we are proposing to 
reduce the annual update to the LTCH PPS standard Federal rate by 
2.0 percentage points for failure of a LTCH to submit the required 
quality data. The MFP adjustment described under section 
1886(b)(3)(B)(xi)(ii) of the Act is currently estimated to be 0.6 
percent for FY 2016. In addition, section 1886(m)(3)(A)(ii) of the 
Act requires that any annual update for FY 2016 be reduced by the 
``other adjustment'' at section 1886(m)(4)(E) of the Act, which is 
0.2 percentage point. Therefore, based on IGI's first quarter 2015 
forecast of the FY 2016 LTCH PPS market basket increase, we are 
proposing to establish an annual update to the LTCH PPS standard 
Federal rate of 1.9 percent (that is, the current FY 2016 estimate 
of the market basket rate-of-increase of 2.7 percent less a proposed 
adjustment of 0.6 percentage point for MFP and less 0.2 percentage 
point). Accordingly, we are proposing to apply an update factor of 
1.9 percent in determining the LTCH PPS standard Federal rate for FY 
2016. For LTCHs that fail to submit quality data for FY 2016, we are 
proposing to apply an annual update to the LTCH PPS standard Federal 
rate of -0.1 percent (that is, the proposed annual update for FY 
2016 of 1.9 percent less 2.0 percentage points for failure to submit 
the required quality data in accordance with section 1886(m)(5)(C) 
of the Act and our rules) by applying a proposed update factor of -
0.1 percent in determining the LTCH PPS standard Federal rate for FY 
2016.

III. Secretary's Recommendations

    MedPAC is recommending an inpatient hospital update equal to 
3.25 percent for FY 2016. MedPAC's rationale for this update 
recommendation is described in more detail below. As mentioned 
above, section 1886(e)(4)(A) of the Act requires that the Secretary, 
taking into consideration the recommendations of MedPAC, recommend 
update factors for inpatient hospital services for each fiscal year 
that take into account the amounts necessary for the efficient and 
effective delivery of medically appropriate and necessary care of 
high quality. Consistent with current law, depending on whether a 
hospital submits quality data and is a meaningful EHR user, we are 
recommending the four possible applicable percentage increases to 
the standardized amount listed in the table under section II. of 
this Appendix B. We are recommending that the same applicable 
percentage increases apply to SCHs. For the Puerto Rico-specific 
standardized amount, we are recommending an update of 1.9 percent.
    In addition to making a recommendation for IPPS hospitals, in 
accordance with section 1886(e)(4)(A) of the Act, we are 
recommending update factors for certain other types of hospitals 
excluded from the IPPS. Consistent with our policies for these 
facilities, we are recommending an update to the target amounts for 
children's hospitals, cancer hospitals, RNHCIs, and short-term acute 
care hospitals located in the U.S. Virgin Islands, Guam, the 
Northern Mariana Islands, and American Samoa of 2.7 percent.
    For FY 2016, consistent with policy set forth in section VII. of 
the preamble of this proposed rule, for LTCHs that submit quality 
data, we are recommending an update of 1.9 percent to the LTCH PPS 
standard Federal rate. For LTCHs that fail to submit quality data 
for FY 2016, we are proposing to apply an annual update to the LTCH 
PPS standard Federal rate of -0.1 percent.

IV. MedPAC Recommendation for Assessing Payment Adequacy and Updating 
Payments in Traditional Medicare

    In its March 2015 Report to Congress, MedPAC assessed the 
adequacy of current payments and costs and the relationship between 
payments and an appropriate cost base. MedPAC recommended an update 
to the hospital inpatient rates equal to 3.25 percent concurrent 
with changes to the outpatient prospective payment system and with 
initiating change to the LTCH PPS. We refer the reader to the March 
2015 MedPAC report, which is available on the Web site at http://www.medpac.gov for a complete discussion on this recommendation. 
MedPAC expects Medicare margins to remain low in 2015. At the same 
time, MedPAC's analysis finds that efficient hospitals have been 
able to maintain positive Medicare margins while maintaining a 
relatively high quality of care. However, under current law, payment 
margins are projected to decline which could result in negative 
Medicare margins industry wide. Specifically, MedPAC noted several 
current law policy changes are scheduled to reduce payments in FY 
2015 and FY 2016. Because of these changes and reduced payments, 
MedPAC asserted that an update of 3.25 percent in the base payment 
is warranted. MedPAC maintains that Medicare payment rates should be 
determined by analysis of payment adequacy rather than an across-
the-board sequester reduction. Therefore, MedPAC recommended that 
hospitals receive base

[[Page 24689]]

payment rates that are 3.25 percent higher than the FY 2015 base 
payment rates, and there should be no sequester adjustment. However, 
MedPAC concluded that if the Congress increases hospital payments by 
reinstating expiring special payments, the full 3.25 percent update 
would not be warranted.
    Response: With regard to MedPAC's recommendation of an update to 
the hospital inpatient rates equal to 3.25 percent, for FY 2016, as 
discussed above, section 1886(b)(3)(B) of the Act, as amended by 
sections 3401(a) and 10319(a) of the Affordable Care Act, sets the 
requirements for the FY 2016 applicable percentage increase. 
Therefore, we are proposing an applicable percentage increase for FY 
2016 of 1.9 percent, provided the hospital submits quality data and 
is a meaningful EHR user, consistent with these statutory 
requirements.
    We note that, because the operating and capital prospective 
payment systems remain separate, we are continuing to use separate 
updates for operating and capital payments. The update to the 
capital rate is discussed in section III. of the Addendum to this 
proposed rule.

[FR Doc. 2015-09245 Filed 4-17-15; 4:15 pm]
 BILLING CODE 4120-1-P